A Letter of Intent in a commercial real estate transaction is not considered a final contract. Unless you clearly make all or part of it legally binding, there is no guarantee that either party needs to commit to the terms within Letter of Intent. While it is possible to enter into a commercial real estate transaction without a Letter of Intent, you may find that not including one could work to your disadvantage.  It all depends on the circumstances of the transaction and how well both parties are willing to work together. In any case, it is advisable to weigh the pros and cons of writing a Letter of Intent.

The advantages of a Letter of Intent are many. It allows both parties to focus on the basic terms such as price/rent/loan amount and closing/occupancy date. By including these and other items in a Letter of Intent, you are essentially forming somewhat of a “gentleman’s (or ladies’) agreement”. It shows that both parties are interested in working together. As well, it can help to make it easier to identify the terms that still need to be negotiated. So, really, it’s a simple way to get the ball rolling.

A Letter of Intent is also a good way to keep the transaction moving forward. If there are any problems or concerns, writing a Letter of Intent can get things out on the table for discussion. If this leads to a stalemate in agreeing upon terms of the transaction, then it also saves time and money that would otherwise be spent in the due diligence and contract drafting phases.

If you don’t have a Letter of Intent, you may potentially be foregoing some of your rights and responsibilities.  You may also be leaving yourself open to losing out on the deal.  Of course, as mentioned previously, it does depend on the circumstances and the willingness of the parties to work together. But, as in any legal transaction, it may be in your best interest to include a Letter of Intent in the process.  You certainly do not want to get yourself in a situation you may later regret.

Letter of Intent
Provided by
Menlo Group