Lease Letter of Intent (LOI): Key Terms Landlords and Tenants Exchange

Answer

Intro: A letter of intent (LOI) in leasing is a short, written summary of the deal points parties intend to put into a formal lease. Landlords, tenants and brokers use an LOI to set expectations, outline major economics and timelines, and identify issues to negotiate before attorneys draft binding lease language.

Main part: An LOI typically covers the transaction’s backbone: property address, parties, lease type and term (years and options), base rent and rent steps or CPI adjustments, operating expense/CAM allocation, security deposit, tenant improvements (TI) and landlord contribution, use clause, parking, and important contingencies (due diligence, zoning, financing). It also sets a proposed timeline for lease execution and occupancy, and may include broker commission terms.
Most LOIs are non-binding as to the lease’s substantive terms but contain a few binding provisions: confidentiality, exclusivity (no-shop), reimbursement of certain third-party costs, or a short period to negotiate a lease. Parties should read the LOI carefully to see which clauses are intended to be binding.

Practical negotiation points include:

• Clarity on TI: specify allowance, scope, approvals and who manages construction.
• Rent structure: indicate gross vs. net, expense pass-throughs and rentable/square-foot basis.
• Assignment/sublease: state whether tenant may assign or sublet and any landlord consent standard.
• Due diligence: define access, length (commonly 15–60 days) and deliverables.
• Binding items: label confidentiality, exclusivity or breakup fees explicitly if you intend them to bind.

Final paragraph: An LOI speeds negotiations and prevents wasted legal drafting, but its language matters — vague terms create confusion later. Before signing or relying on an LOI, verify which provisions are binding and consider having a licensed attorney or broker review the document to protect your financial and operational interests.