Letter of Intent (LOI)
A preliminary document outlining the main business terms before a formal lease is drafted.
01
What It Is
A letter of intent sets out the key business points of a proposed lease — rent, term, commencement, expense structure, tenant improvements, options, and any contingencies — before either party invests in a full lease document.
Most LOIs are non-binding as to the lease itself, though specific provisions such as confidentiality or exclusivity may be intended to bind. That distinction should be stated explicitly.
02
Why It Matters
The LOI is where leverage lives. Terms agreed at this stage tend to carry into the lease with little change, and points left out are far harder to introduce once an attorney has drafted the document.
It also saves money. Aligning on economics and structure first keeps legal review focused on language rather than on renegotiating basic terms.
For landlords, a well-prepared LOI demonstrates a serious, qualified prospect and shortens the path to a signed lease.
03
Common Misconceptions
- "An LOI is just a formality." It frames the entire negotiation.
- "Non-binding means nothing in it counts." Selected provisions can be binding, and the business terms shape the lease.
- "Only rent and term belong in an LOI." Improvements, options, exclusivity, and expense structure belong there too.
04
Questions to Ask
- Which provisions in this LOI are intended to be binding?
- What is the deadline for delivering a draft lease and for signing?
- Are tenant improvements, allowances, and delivery condition addressed?
- Does the LOI cover renewal options, expansion rights, and exclusivity?
- What contingencies — financing, zoning, permits, inspection — should be included?
05
Related Reading & Resources
The most successful real estate decisions often involve collaboration between several professionals working toward the same goal. Understanding each person's role helps you ask better questions and make more confident decisions.
06
Other Lease Terms
- Gross LeaseA lease where the landlord pays most or all operating expenses and the tenant pays a single, predictable rent.
- Modified Gross LeaseA middle-ground structure where landlord and tenant split operating expenses in a negotiated way.
- Triple Net (NNN) LeaseA structure where the tenant pays base rent plus property taxes, insurance, and maintenance.
- CAM ChargesThe shared costs of operating and maintaining areas all tenants use, billed as a pro-rata share.
- Tenant Improvements (TI)Modifications made to a space so it fits the tenant's use, and the negotiated question of who pays.
- Percentage LeaseA retail structure where rent includes a base amount plus a percentage of sales above a threshold.
Questions About a Commercial Lease?
Whether you're evaluating space for your business or preparing to lease your property, I'd be happy to help you review the terms, understand the economics, and negotiate an agreement that fits your plans.
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