Commercial Lease Letters of Intent: Obtaining Favorable Terms and Avoiding Protracted Negotiations

Description

As leasing transactions accelerate, LOIs are a crucial tool for keeping the deal in place as negotiations proceed. Accurately setting out agreements to key lease terms in an LOI will expedite the negotiations and avoid contentious disputes, making the client's transaction smoother, more efficient, and less costly.

From the tenant's perspective, a comprehensive LOI setting out the key economic terms puts it in a position to obtain more favorable lease terms. From the landlord's perspective, time is not wasted on an unconsummated deal.

Beyond basic terms of rent, security deposit, and lease term, the LOI may include the permitted uses, assignment and subletting, signage, SNDAs, improvements, and financial guarantees. While the parties rarely intend for lease terms to be binding, some terms may be made expressly binding, such as confidentiality provisions, access to sensitive information, and performance deadlines.

Counsel must be careful to consider various factors that courts look at in determining whether the parties have expressed an intent to bind themselves to a contract, notwithstanding the custom and practice or inconclusive term expressing the non-binding effect of a letter of intent.

Listen as our authoritative panel of real estate practitioners reviews the benefits of using LOIs to expedite real estate leasing transactions and avoid drafting pitfalls. The panel will discuss best practices for structuring and negotiating critical terms for an LOI from the perspective of both tenant and landlord, issues unique to brokers during the LOI stage of real estate transactions, and the enforceability of LOIs if the deal falls apart.