A letter of intent is a preliminary deal document that outlines major commercial real estate terms before a full contract or lease is drafted.
A letter of intent is a preliminary deal document that outlines major commercial real estate terms before a full contract or lease is drafted. In plain language, it is a term sheet-style document that helps the parties see whether they agree on the big points before spending time on final documents.
A letter of intent matters because commercial real estate deals often have many negotiated pieces. Price or base rent is only one part of the discussion. The parties may also need to address due-diligence timing, deposits, tenant improvements, build-out responsibility, expense pass-throughs, renewal options, exclusivity, contingencies, closing timing, and broker involvement.
It also matters because a letter of intent can reduce confusion early. If the parties disagree on a major term, it is usually better to learn that before a lease, purchase agreement, or legal review process becomes expensive and time-consuming.
For readers, the key point is that a letter of intent is not the same as the final deal document. Some provisions may be intended as nonbinding business terms, while others may be written to have immediate effect. The exact wording and local treatment matter, so this page explains the vocabulary rather than giving legal advice.
Readers usually see letters of intent in commercial leasing, property acquisitions, development transactions, and business-space negotiations. A broker may help prepare one after the parties discuss a site or space. A landlord and tenant may use one before a full Lease is drafted. A buyer and seller may use one before a more detailed Purchase Agreement.
In leasing, the letter of intent may describe the premises, rent, lease term, renewal options, Triple Net Lease charges, Tenant Improvement Allowance, and delivery condition. In a purchase, it may describe price, deposits, Due Diligence, financing timing, closing conditions, and confidentiality expectations.
A retailer wants to lease 2,400 square feet in a shopping center. Before the landlord’s attorney drafts a full lease, the parties sign a letter of intent showing the proposed rent, lease term, tenant improvement allowance, permitted use, opening deadline, signage rights, and who pays common area maintenance charges.
A letter of intent is not the same as a finished contract. It is usually shorter, more business-focused, and less detailed than the final lease or purchase agreement.
It is also not a casual email summary if the parties treat it as a deal document. Even when many terms are preliminary, some provisions may be drafted to matter immediately, such as confidentiality, exclusivity, access, or expense reimbursement. Readers should not assume the label alone determines legal effect.
Another common misunderstanding is thinking a letter of intent belongs only in large institutional deals. Smaller commercial leases and local property purchases may also use them because they help organize the negotiation.
It is also different from an offer in a residential purchase setting. Residential offers often become the actual purchase agreement when accepted. A commercial letter of intent more often acts as a step toward fuller documentation.