What is a Letter of Intent (LOI) for commercial properties Arizona?
No one wants to waste time and money on a deal that never gets done! It’s with this in mind, that the ‘Letter of Intent’, or LOI as it is commonly referred to, was created. A detailed, non binding Letter of Intent is an invaluable time saver for all parties involved in determining if there is a deal to be had.
A Letter of Intent is a letter from one party to another outlining the basic points of a real estate transaction. The use of an LOI implies both parties intent to reach an agreement, but have not done so. Unless it is purposefully not included by one of the parties involved, the LOI should clearly state that it is Non-Binding.
When dealing with the extensive documentation that comes with a real estate transaction, an LOI saves time and money. The hope is to come to an agreement on all major deal points before all the tedious paper work that comes with the transaction. The LOI helps bring issues to the surface on the forefront. Issues such as: price, length of term, tenant improvements, security deposit, signing a personal guaranty, annual increases in a lease, signage or parking allocation, etc. These issues vary whether it’s a lease or a purchase but the idea is the same. It is better to discuss these obstacles up front, before too many resources are spent on a deal that won’t happen.
The use of the LOI varies across the country but as long as it’s clearly stated that the LOI is Non-Binding, legal review can wait until an agreement is reached and the final documents are prepared.
Below is a list of common terms found in a Letter of Intent:
- Identify the parties involved (Buyer/Seller or Tenant/Landlord)
- Set out key terms such as: purchase price, lease rate, rental increases, length of lease, etc
- Specify a time frame for acceptance
- Clearly state that the LOI is Non-Binding
- State that the LOI will be superseded by a signed agreement
- Depending on the type of use, there are other provisions that need to be addressed in the LOI.
Whether you are a buyer or tenant looking for property in Arizona or a seller/landlord looking to sell or lease your property in Arizona, the use of an LOI is critical to your success.
Call the Menlo Group today to discuss your current commercial properties Arizona needs. We can help walk you through the proper use of a Letter of Intent while saving you time and money throughout the commercial real estate transaction.