A standard real estate Letter of Intent includes:
- Parties of those involved
- Sale price, before and after concessions, closing costs and taxes
- Key terms like length of lease, lease renewal
- Expected closing or signing date for contract to ensure quoted costs/rates
- Clear indication that the letter of intent is non-binding, meaning no final decision has yet to be made
- Any additional information that needs to be addressed prior to signing a contract
However, is it always necessary? Are there times when you shouldn’t use a real estate Letter of Intent? Particularly, if it’s intended purpose is a non-binding document? These are questions that often come up during the commercial real estate transaction process.
The following situations are items best included in a separate, binding agreement – like an early access agreement.
- Covenants of confidentiality
- Access to certain information
- Bans on further marketing or acceptance of offers
- Performance deadlines or agreements to pay for certain pre-agreement costs
A real estate Letter of Intent plays a significant part in a commercial property purchase or lease transaction. In most cases, the parties intend for the letter of intent to be a non-binding document that serves as an outline for the lease agreement. Outlining some initial terms of the transaction can save some you from stress and losing money. A letter of intent is also much shorter than a full contract and is easily changed into a contract once all terms on agreed upon. A real estate Letter of Intent is less expensive and faster than a full contract.
A Letter of Intent should be viewed as seriously as a legal document. It is important that it is carefully drafted. Both parties should understand and agree to the terms before it is signed.
Should you have questions about writing a credible real estate Letter of Intent, Menlo’s commercial real estate team is available help you with this process. Contact us here. We look forward to working with you!