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What is a LOI?

Updated: Apr 24, 2023

A letter of intent (LOI) is a written document that outlines the preliminary terms and conditions of a proposed commercial real estate transaction. It is often the first step in the negotiation process between the buyer and seller or between a landlord and a potential tenant.

In the context of commercial real estate, a letter of intent typically includes the following information:

  1. Description of the property: The LOI will describe the commercial real estate property being considered, including its location, size, and any relevant details about the building or space.

  2. Purchase or lease terms: The LOI will outline the basic terms of the proposed transaction, such as the purchase price or rental rate, the length of the lease term, and any security deposit or earnest money requirements.

  3. Due diligence: The LOI may also specify any due diligence requirements that must be completed before the transaction can be finalized, such as property inspections or environmental assessments.

  4. Contingencies: The LOI may also include any contingencies that must be met before the transaction can proceed, such as obtaining financing or securing necessary permits.

  5. Confidentiality: The LOI may include a confidentiality provision to ensure that any sensitive information exchanged during the negotiation process is kept confidential.

The purpose of a letter of intent is to establish a preliminary agreement between the parties before the more detailed and legally binding purchase or lease agreement is drafted. It allows both parties to outline their expectations and negotiate the terms of the transaction in good faith before committing to a legally binding contract.

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