A letter of intent, also known as LOI, is a letter that is used in informing the owner of a property that you are interested in leasing a commercial property. In addition, it gives the landlord a concise idea of how you will use the property in case they agree to lease you the building.
While it doesn’t cover all the excruciating details of a lease agreement, it is the overview of your intentions and the basis of a commercial office negotiation. Considering the importance of the LOI in an office lease, it is important to pay attention to the following tips:
Discover Your Landlord’s Needs
A commercial LOI is a useful tool to establish a meeting with your potential landlord. To craft such a document that gets the attention of your landlord, you need to understand your landlord’s needs. If you are having issues gathering sufficient information on the profile of your landlord, you may ask your Tenant Rep to help you make an educated guess based on the type of the landlord. The knowledge of your landlord needs will help in making the lease process less frustrating and useful. For instance, some landlords are known for having procedures they follow when leasing out their properties, and following those procedures will ensure you have a good experience. In addition, a large institutional owner like a publicly-traded REIT or pension fund will usually look at the total value of all of the net income they get from the lease — regardless of how they get it — discounted to the present day.
Draft Your LOI
When drafting the LOI for commercial office leases, the lease premise should be identified with sufficient information, so the landlord can know which property the tenant is referring to, especially if the landlord has many properties. In addition, the lease premise in the LOI should contain a reference to such assumptions as parking locations and other shared common access. This information will show you have conducted due diligence on the property. In addition, the LOI can be between a single page or as many as 20 pages. The complexity of the real estate deal will determine how long it should be. The LOI allows the property owner to stop other negotiations while you make a formal offer to lease the property.
Work With A Tenant Rep Broker
It usually takes a short time between identifying a good building and sending the LOI. Therefore, it is essential that tenants work a tenant rep who can help them carefully consider their options. The tenant broker has a good understanding of the market area as well as the landlord. Hence, the tenant broker will be in a good position to help you draft a good LOI. While an LOI is designed to be a legal document, but not an enforceable agreement; it is often better to draft and treat it like it is. In addition, the tenant rep brings experience and lots of market perspective in ensuring your commercial LOI is accepted for your chosen building that meets your business needs.