What Is a Letter of Intent (LOI) in Commercial Real Estate?

Updated November 2, 2026

A letter of intent, or LOI, is a short document that lays out the main business terms of a deal before anyone pays a lawyer to draft the full lease or purchase agreement. It is usually two to five pages. Most of it is not legally binding.

Why people use an LOI

A lease can run 60 to 100 pages. A purchase agreement can be just as long. It makes no sense to draft one until both sides agree on the big items. The LOI is where you settle rent, term, price, concessions, and timing. Once both sides sign it, the lawyers turn it into the real document.

An LOI also shows the other side you are serious. In a competitive deal, a clean LOI with real numbers often wins over a vague email.

What a lease LOI usually covers

Parties, premises, and size
Permitted use
Term and renewal options
Base rent and annual increases
Additional rent such as NNN charges or operating expense increases
Free rent and tenant improvement allowance
Delivery condition and landlord work
Rent commencement date
Security deposit and guaranty
Exclusive use, co-tenancy, signage, and contingencies

What a purchase LOI usually covers

Price and how it is paid
Earnest money deposit
Due diligence period
Financing contingency
Closing date and closing costs
Exclusivity while the contract is drafted

Tips

Put real numbers in the LOI. Leaving items "to be negotiated in the lease" pushes fights to the stage where lawyers bill by the hour. Give the letter a short expiration, often 5 to 10 business days, so it does not sit on someone's desk.

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Other guides

This guide is general information, not legal advice. Deal terms vary by market and by deal.