The Commercial Property Letter of Intent

Conor Meyers — Co-Founder & Business AttorneyHas built and run businesses; advises owners on contracts, transactions, and risk. About Conor →

The LOI is where the deal is really made. The purchase agreement mostly writes it down.

By the time a commercial purchase agreement or lease reaches a first draft, most of the important decisions have already been taken. They were taken in the letter of intent, when the parties were still exchanging positions and neither had committed to legal spend. Knowing what to include in a property LOI is therefore worth more than knowing how to argue about the definitive document.

We handle these matters for growth-stage companies in Idaho and California. This is general information — not legal or tax advice on a specific situation.

Concessions made in an LOI are rarely recovered later.

What to include in a property LOI

For a purchase: price, deposit and when it becomes non-refundable, the diligence period, title and survey review timing, the closing date, what conveys with the property, and any financing condition. For a lease: rent and escalations, the term and any options, the structure and expense allocation, the tenant improvement allowance, delivery condition, and the commencement date.

Both should name who bears which costs if the transaction does not close, and both should identify the exact legal description or premises rather than a marketing address.

A marketing address is not a legal description.

Is an LOI binding in commercial real estate?

Asking is an LOI binding in commercial real estate produces the same answer as in any transaction: partly. Commercial terms are ordinarily expressed as non-binding, while confidentiality, exclusivity, expense allocation, and governing law bind and are enforceable.

The document should separate the two categories explicitly. Where it does not, courts asked to determine intent look at the language and the parties’ conduct, and a party that behaved as though bound may be found to have been.

Conduct can bind a party the label was meant to protect.

LOI vs purchase agreement

The LOI vs purchase agreement distinction is one of function. The LOI records the commercial bargain in a page or two. The purchase agreement operationalizes it — representations, warranties, conditions to closing, remedies, allocation of risk between signing and closing, and the mechanics of the transfer itself.

The LOI does not need to solve every problem, but it should resolve every economic one. Anything left ambiguous in the LOI is renegotiated in the definitive agreement at a point when one side usually has more leverage than it did before.

Resolve the economics in the LOI. Leave the mechanics to the agreement.

Negotiating LOI terms for property

Negotiating LOI terms for property means concentrating on the few provisions that set the frame: the length and scope of the diligence period, whether the deposit becomes hard and when, exclusivity, and the allocation of transaction costs.

The SBA’s lease-or-buy guidance is a useful checklist for what a buyer should have resolved before the deposit goes hard. Diligence deserves particular attention on commercial property, because the work is substantive — title and survey, environmental assessment, zoning verification, lease and service contract review. Where environmental review is required, the EPA’s all appropriate inquiries standard governs what a Phase I must cover, and its timeline should shape the diligence window rather than be squeezed into one set for other reasons. A commercial LOI review before signature is short work compared to renegotiating afterward.

Set the diligence window around the work, not around the calendar.

The underlying rules on this are published directly by Idaho Legislature, and both are worth reading before you rely on a summary of them — including this one.

A simple plan to get a legal partner in your corner

Owners who bring in attorney for a commercial property purchase early almost always pay less than those who call one afterward.

The engagement at a glance

A three-step path from first call to ongoing protection.

Frequently asked questions