Letter of Intent

A letter of Intent is also referred to as an LOI. A Letter of Intent is a draft document in commercial real estate which is negotiated between a renter and landlord or a buyer and seller. The main economics and deal points with suggested parameters are stated in the LOI or Letter of Intent. They are meant to lay out the key components that both parties can assess to determine whether they wish to move on with a formal contract.

Before advancing to an official contract, the letter of intent is normally meant to be a non-binding negotiation. A Letter of Intent should contain disclaimers if it is not intended to be binding since how it is written can make it binding.

The lease rate, lease term or length of lease, annual increases, tenant improvement allowance, free rent, assignability, and guarantees are some of the most important terms that are discussed and/or negotiated in a letter of intent to lease commercial space.

Professional letterhead or informal email submissions of letters of intent are both acceptable methods. Even though the Letter of Intent (LOI) is not legally binding, some landlords ask both the landlord and tenant to sign it as a good-faith acknowledgment that both parties have decided to move forward before advancing to a formal agreement or contract.

An agreed-upon Letter of Intent is used to demonstrate that both parties are ready to proceed with the lease or sale of a certain property, structure, or space. To get backup offers or other interested parties in case the initial tenant or buyer backs out or is unable to fulfill, many landlords or sellers nevertheless continue to market their properties.

In order to confirm that the tenant is in a sound enough position to proceed and/or that the landlord is confident in the tenant's financial strength, many landlords also request that a tenant submit their corporate or personal financial statements to the landlord before signing an LOI or right away afterward.

Depending on how many elements are addressed and agreed upon, a Letter of Intent is a single-page document or up to five or more.