In prior blogs, I’ve explained the meaning of key provisions in commercial leases. Now I’d like to discuss how to proceed with presenting these key provisions to a potential landlord for approval and inclusion of these terms in your lease. This goal is accomplished with a Letter of Intent.

I look at this letter as an essential foundation in the negotiations of a successful commercial lease. It systematically offers detailed provisions that the business owner and landlord can each accept.

Furthermore, the Letter of Intent gives you and your prospective property manager time to shape an appropriate agreement before the actual creation of a lease. This step is crucial for the development of a strong and mutually satisfying contract that has the ability to last for years to come.

Basically, all of the provisions I’ve outlined for you in prior blogs will be the bullet points of Letter of Intent. Topics such as:

  • the amount of rent,
  • the extent of any build-out credit and
  • the length of the lease,

are all appropriate items to address in the Letter of Intent. From the amount of rent to any improvements within the leased space to specifics about insurance and liability, you can refer to all of these vital details in your letter to the landlord.

It’s essential to note, however, that while the Letter of Intent presents certain conditions for the proposed lease agreement, there is no contract as of yet. Rather, the Letter of Intent is merely the first stage in determining how to structure a fair lease between both parties. Consider this document as a guideline for how the transaction should move forward.

Why the Letter of Intent Matters

It may seem like an unnecessary formality to create a letter of intent instead of going directly to lease negotiations. However, this document can be very important. As an active business owner, you may not want to invest time examining the rented space and fulfilling due diligence reviews without some sort of written commitment from the landlord that the landlord is receptive to your core proposed terms.

Similarly, many business owners are unwilling to incur the legal expense associated with preparing a typical 10 plus page commercial lease unless they are certain that the fundamental terms are likely to be agreed to by the landlord.