What should be included for a LOI for a commercial lease?

In Leasing Property - Asked by Jill B. - Jun 29, 2010
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Michal B.
Miami Beach, FL

You want to include as many major points that will be a part the lease you are seeking such as:
- identifying parties - landlord and tenant
- identifying property - full address, floor or suite number, approximate SF
- initial lease term and subsequent option periods if any
- lease commencement
- proposed use
- offering rent amount and its composition (base, CAM, taxes, etc.)
- security deposit
- TI allowance
- broker representation
- delivery condition
- guarantees personal/corporate
- other special conditions and requirements

Jun 30, 2010
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Gerard M.
Fort Myers, FL

Be careful with LOI's as they are not binding on either party. I do NOT use LOI's but instead open communication with emails, then I quickly get property under contract, whether lease or purchase, including the necessary due dilligence time periods and escape clauses. Should something unexpected arise, you can re-open negotiations.

Jun 30, 2010
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Bud W.
Memphis, TN

Jill; Always add to your LOI, that you have the right to include items not covered in the LOI to the contract, when submitted, and prior to acceptance. Don't allow the LOI to be the only language used in the contract (PSA). Be flexable!

Jun 30, 2010
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Damon D.
Bala Cynwyd, PA

To Gerard's point - ALWAYS put a disclaimer in the LOI stating something like the following:
"This Letter of Intent is intended only to outline the basic terms associated with a proposed lease. Neither party mentioned herein shall be obligated to the other in any way unless a lease document is executed by both Landlord and Tenant and a fully executed copy is returned to the Tenant."
Rules may/will vary by state on how this language is best written.
Also, on a separate note, always put an expiration date on the LOI, as it will help keep the parties moving. Time kills deals!

Jun 30, 2010
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Rick L.
Cleveland, OH

Always secure the LOI with a payment that goes toward the rent or sale. This can be called "hand money." This should not be confused with earneast money. Which will be returned to the party if the deal fails.

Jul 1, 2010
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Dawn L.
Boca Raton, FL

Commencement Date (when they're handed the keys)
Rent Commencement Date (when rent is due - in case of free rent)
If Rent is amortized, put in the asking rent, plus free rent, then (effective rent = $xxxx)
Lessee's expenses (like HVAC, Electric, Phone, etc)
Lessor's expenses (maintaining the roof, structure, etc)
Signage/parking uses ("at tenant's sole expense - Landlord approval")
State who is paying the commission.
Our letters of intent are long, but very detailed so as to save confusion.
But remember: these are not LEGALLY binding, and it should state as such clearly in the document.
Hope this helps.

Jul 1, 2010
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Marie T.
Pasadena, CA

This may differ from state-to-state due to legalities. I would indicate in which state you are located.

Jul 6, 2010
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Guy T.
Springfield, VA

I would also add if you taking the space As Is or if you are expecting the Landlord to make certain improvements, I would list those improvements to be made by the Landlord, in addition to any tenant improvements that tenant will be responsible for.

Jul 27, 2010
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