A Letter of Intent for the lease or purchase of commercial real estate property can be simple or complex. It depends on what both parties want to include in it. The language that you use in the Letter of Intent should be specific as the terms included can be critical to the transaction.

Typically, most of the work in drafting a good Letter of Intent occurs before a single word is even written. Thinking through your terms beforehand will help in writing an effective Letter of Intent. Consulting with knowledgeable advisors, including your agent and an attorney, will help to make sure nothing has been overlooked.

When using a Letter of Intent for your commercial real estate transaction, you should first decide if the letter will be binding or non-binding. In some cases, you may want it to be partially binding. For example, you may opt to include a confidentiality provision restricting disclosure of transaction terms to an otherwise non-binding Letter of Intent. Another provision to consider is one that restricts the seller or landlord from marketing the property pending the parties entering into the formal agreement. Most certainly, we strongly encourage that your agent and/or attorney can help with these and other details to make sure your letter says what you need it to say.

You may also want to think about including the following:

  • a “good faith” obligation that would require both parties to negotiate in good faith since a non-binding Letter of Intent does not generally require either party to do so
  • an indemnification provision that protects from damages or claims if the buyer or tenant will have access to the property before the agreement is finalized
  • remedies of rights that will be available should one party or another not follow through with any binding terms of the Letter of Intent
  • a deadline date for the parties to enter into the formal agreement and a date by which the Letter of Intent will terminate should the formal agreement fall through.

A Letter of Intent, no matter how complicated, should be viewed as you would any legal document. It is important that it is carefully drafted and that both parties understand and agree to the terms before the letter is signed. You don’t want to risk signing a Letter of Intent unless you completely understand its use and the legal consequences if misused.

Letter of Intent
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