Before a commercial lease is drafted, the landlord and tenant typically use a Letter of Intent (LOI) to outline the proposed business terms of the transaction. A well-prepared LOI creates a framework for negotiations, identifies potential issues early, and gives the attorneys a clearer roadmap for drafting the lease.

What an LOI Should Address

The LOI should clarify the deal’s most important business points, including:

• Base rent and scheduled increases
• Lease term and renewal options
• Tenant improvement allowance
• Delivery and condition of the premises
• Permitted use
• Operating expenses
• Contingencies and approvals
• Important deadlines and timing

What an LOI Is—and Is Not

An LOI summarizes the parties’ current understanding of the proposed transaction. Although most LOIs are primarily non-binding, certain provisions—such as confidentiality, exclusivity, and access—may be binding.

The LOI is not the final lease, but that does not make it unimportant. Terms established during the LOI stage often shape the entire lease negotiation. If a significant issue is overlooked, it may resurface later, delay the transaction, increase legal costs, or change the economics of the deal.

Godino Tip of the Week

Treat the LOI as a strategic document, not a shortcut. Clarifying the economics, timing, responsibilities, approvals, and rights of each party before legal drafting begins can lead to a more efficient negotiation and fewer surprises.

Need guidance with your next commercial real estate transaction? Contact Godino & Company, Inc. to learn how our experience can help you navigate the process.