The short answer A letter of intent (LOI) is a short document that lays out the main terms of a commercial lease or purchase before attorneys draft the full lease or contract. It is generally non-binding on the deal terms, but some provisions, like confidentiality or exclusivity, can be binding.
Sample lease LOI terms for a flex unit:
Premises: 2,500 SF. Term: 60 months. Base rent: $14.00/SF NNN, increasing 3% per year.
Free rent: 2 months. TI allowance: $10.00/SF. Security deposit: one month's base rent.
Year 1 annual base rent: $14.00 × 2,500 = $35,000.
Year 1 monthly base rent: $35,000 ÷ 12 = $2,916.67.
Value of free rent: $35,000 × 2 ÷ 12 = $5,833.33.
TI allowance: $10.00 × 2,500 = $25,000.
Security deposit: $2,916.67.
Is a letter of intent binding?
Usually not on the business terms. Most LOIs say that neither side is bound until a lease or purchase contract is signed. Provisions that are often written to be binding include:
- Confidentiality. Neither side shares the terms.
- Exclusivity or no-shop. The owner stops negotiating with others for a set period.
- Non-binding statement itself. The clause saying the rest is not binding.
Calling a document an LOI does not by itself make it non-binding; the wording matters. Have your attorney review an LOI before you sign it. This page is general information, not legal advice.
What goes in a lease LOI?
Premises and square footage, permitted use, term and commencement, base rent and escalations, the expense structure (NNN or gross), free rent, TI allowance, security deposit, renewal and expansion options, caps on controllable expenses, signage, and contingencies such as permits for your use.
What goes in a purchase LOI?
Price, earnest money, due diligence period, financing contingency (important for SBA buyers, whose loans take time), closing date, title and survey, what personal property is included, and how closing costs are split. If you plan to occupy the building, see owner-occupied property for the SBA occupancy rules your lender will check.
How this affects your lease or purchase
- Negotiate hard at the LOI stage. Terms left out are harder to add later.
- Put the money terms in numbers, not "market" or "to be negotiated."
- Include every concession you need: free rent, allowance, caps, options.
- Keep deadlines realistic for your lender, inspections and permits.
Goff CRE Group, brokered by Nassar Realty, drafts and negotiates LOIs for tenants through tenant representation and for buyers through buyer representation.
