The LOI or Letter of Intent lays the groundwork for many real estate deals. While a LOI isn’t required it’s very helpful.
Uses
A LOI is used in purchase and leasing transactions. The LOI is a non-binding document that a prospective buyer or tenant can send to a landlord to lay out the basic terms they are proposing on a deal.
Typical Terms
A LOI will typically include the following terms:
- Subject property description
- Offer price or lease rate
- Proposed timeline for the deal
- Any required conditions from the landlord
- Non-binding language
To Sign or Not To Sign
I am always surprised to see signature lines at the bottom of a LOI, one line for the offeror and one line for the offeree. I am surprised because the LOI is meant to be non-binding, and if it’s not legally binding, what is the value of the signature?
The LOI is meant to be a precursor to a lease or Purchase and Sale Agreement (PSA) which will be a legally binding contract.
The terms included in the LOI are meant to show intent and to start the process of negotiation.
