Using Letters of Intent in Commercial Real Estate Negotiations

Before executing a commercial property lease or sales contract, the parties may prepare a letter of intent or an agreement in principle. The letter of intent or a similar document (the “LOIs”) generally signals that the parties have agreed on the outline of a deal, but not on all of its provisions or details. While LOIs can serve different functions and purposes—including elimination of future misunderstandings, stating the terms on which agreement has been reached, and securing the parties’ exclusive efforts toward concluding the transaction—they should be used thoughtfully and prepared carefully.