CRE glossary
Letter of intent (LOI)
A letter of intent (LOI) is a non-binding written outline of the major business terms of a proposed commercial lease, base rent, term, TI allowance, free rent, escalation, options, and key conditions. The LOI lets both sides confirm alignment on economics before either spends legal hours drafting and negotiating the binding lease itself.
LOIs sit between an opening offer and a fully drafted lease. They are explicitly non-binding except for a small set of provisions (confidentiality, exclusivity, sometimes broker commission language). The non-binding character is what makes them useful: parties can pressure-test economic alignment, walk away cheaply if there's a deal-breaker, and avoid burning legal fees on a deal that won't happen.
A modern tenant-rep LOI runs 2–4 pages and covers: identification of premises, rentable square feet, base rent and structure (gross/NNN/full-service), term length, commencement and expiration dates, free rent months, TI allowance, escalation method (CPI / fixed / fair market), parking, signage, renewal options, expansion rights, exclusivity, contingencies (board approval, financing, due diligence), and closing process.
The LOI's real job is to surface deal-killers before lease drafting. Common LOI-stage deal-killers: tenant's actual credit profile (drives guaranty negotiations), landlord's lender approval requirements (slows everything), capital improvements timing, rooftop / signage rights that the broker assumed but landlord won't grant. Surface these now or hate yourself in week 6.
Example
- Tenant
- Acme Inc.
- Premises
- 12,500 RSF, Suite 1800
- Base rent
- $58/SF Year 1, 3% annual
- Term
- 84 months
- Free rent
- 6 months
- TI allowance
- $85/SF
- Renewal
- One 5-year option at FMV
Broker perspective
Send the LOI cleanly drafted, not as a markup of the landlord's template. The party who controls the document controls the deal, every concession the other side asks for has to be requested, written, justified. DealDesk's LOI Builder generates a market-standard document in under two minutes, leaving you free to spend negotiating energy on the terms that move the broker's commission, not the formatting.
Frequently asked
People also ask
Is an LOI legally binding?
Mostly no, it's the standard non-binding term sheet. A few provisions are typically binding: confidentiality, exclusivity (no shopping the deal), and broker commission language. Binding clauses must be explicitly labeled as such.
How long does an LOI take to negotiate?
1–3 weeks for typical office deals. Big-box retail and complex sublease situations can run 6–8 weeks. The negotiation is mostly economics; legal review is light at this stage.
Should I use a template?
Use a market-standard template tuned for your side (tenant-rep vs landlord-rep) and your asset class. Generic LOI templates miss material clauses (e.g., co-tenancy for retail, dock-door specs for industrial).
What happens after the LOI is signed?
Landlord's counsel drafts the binding lease. Most economics carry through unchanged. Disputes usually surface around guaranty terms, default cure periods, and operating-expense definitions, areas the LOI rarely covers in detail.
Related terms
Base rent
The headline rent before pass-through expenses, usually quoted in $/SF/year and the starting point for every comp.
Tenant improvements (TI / TIA)
Money the landlord contributes toward customizing the space for the tenant, usually expressed as $/SF.
Free rent (abated rent)
A period at the start of the term where the tenant pays no base rent, used to offset move-in costs and competitive pricing.
Good guy guaranty
A limited personal guaranty that protects the landlord against unpaid rent only if the tenant doesn't surrender the space cleanly.
See letter of intent (loi) extracted from a real lease.
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