A letter of intent, or LOI, is a document that outlines important terms in a real estate lease to ensure that both parties agree to the major deal points prior to drafting the actual lease agreement.
The LOI is often written by the tenant or their broker, but can also be written by the landlord or their broker. It’s intended to outline the terms that the party writing the letter is proposing to the other party.
Usually, one party will draft the LOI with their desired terms and send it to the other party, who will then provide revisions outlining their counterproposal. It’s not unusual for the document to be passed back-and-forth several times before coming to an agreement.
What terms are typically included in a letter of intent?
Most of the more detailed legal terms are often left out of the LOI, and instead pushed off to the actual lease agreement.
Are letters of intent legally binding agreements?
Typically, LOIs are designed to be non-binding and unenforceable documents. They’re simply a way to get each party’s terms on paper so that the major items are agreed upon prior to spending time and money drafting a formal (and binding) lease agreement.
However, it’s important to make sure the letter is drafted in such a way that it’s clearly non-binding, and it’s considered bad form to renegotiate terms that were agreed upon in the LOI. While under most circumstances, it’s not an official agreement and there’s no legal basis for enforcement, you still want to make sure you’re comfortable with the LOI’s terms prior to signing.
Example of an LOI
The following is an example of a letter of intent drafted by the tenant’s broker: