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Commercial Lease Letters of Intent: Obtaining Favorable Terms and Avoiding Protracted Negotiations

Permitted Uses, Assignment and Subletting, Signage, Improvements, Financial Guarantees, SNDAs, Confidentiality Provisions

Recording of a 90-minute premium CLE video webinar with Q&A

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Conducted on Thursday, August 10, 2023

Recorded event now available

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This CLE course will address both practical and strategic considerations for drafting and negotiating critical terms for a letter of intent (LOI) for commercial leasing transactions. The panel will discuss how principals and representatives for landlords and tenants should structure an LOI and use the document to promote smooth lease negotiations in office and retail lease transactions.

Description

As leasing transactions accelerate, LOIs are a crucial tool for keeping the deal in place as negotiations proceed. Accurately setting out agreements to key lease terms in an LOI will expedite the negotiations and avoid contentious disputes, making the client's transaction smoother, more efficient, and less costly.

From the tenant's perspective, a comprehensive LOI setting out the key economic terms puts it in a position to obtain more favorable lease terms. From the landlord's perspective, time is not wasted on an unconsummated deal.

Beyond basic terms of rent, security deposit, and lease term, the LOI may include the permitted uses, assignment and subletting, signage, SNDAs, improvements, and financial guarantees. While the parties rarely intend for lease terms to be binding, some terms may be made expressly binding, such as confidentiality provisions, access to sensitive information, and performance deadlines.

Counsel must be careful to consider various factors that courts look at in determining whether the parties have expressed an intent to bind themselves to a contract, notwithstanding the custom and practice or inconclusive term expressing the non-binding effect of a letter of intent.

Listen as our authoritative panel of real estate practitioners reviews the benefits of using LOIs to expedite real estate leasing transactions and avoid drafting pitfalls. The panel will discuss best practices for structuring and negotiating critical terms for an LOI from the perspective of both tenant and landlord, issues unique to brokers during the LOI stage of real estate transactions, and the enforceability of LOIs if the deal falls apart.

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Outline

  1. Advantages of using LOI in real estate leasing transactions
    1. Meeting of the minds
    2. RFPs
    3. Uniformity
    4. Oft-overlooked key issues
    5. Ease of drafting and negotiating a lease
  2. Binding vs. non-binding terms
  3. Negotiating specific terms of the LOI and general format of the LOI
    1. Rent
    2. Term and renewal options
    3. Security deposits
    4. Build-out, construction allowance, terms of construction
    5. Use/exclusive use
    6. Code compliance
      1. ADA
      2. Asbestos
      3. Other unknown conditions
      4. Parking and other amenities
      5. Exit strategies
        1. Assignment
        2. Subletting
        3. Change in ownership
  4. Enforceability of the LOI
  5. Drafting pitfalls
  6. Use of disclosures in an LOI

Benefits

The panel will review these and other relevant issues:

  • What are the key advantages of LOIs from the perspectives of the parties?
  • What strategic decisions need to be made to determine how comprehensive an LOI should be?
  • What are terms of the LOI that should be made binding?
  • What is the impact technology has on negotiating LOIs and on contract formation, including the use of text messages, emails, and other means of electronic communication?
  • Why use the qualifier "to be further negotiated in the lease documentation"?
  • Should marketing language be avoided?
  • What factors do courts consider in determining the parties' intent to bind, and thus, the enforceability of the terms of the LOI?
  • Who signs the LOI, if at all?

Faculty

Duskin, Margaret
Margaret Duskin

Executive Director
Cushman & Wakefield

A recognized market leader and innovator, Ms. Duskin has leased or sold more than 10 million square feet of office...  |  Read More

Fishman, Manuel
Manuel Fishman

Shareholder
Buchalter

Mr. Fishman focuses his practice on representing real estate developers, owners and secured lenders in the acquisition,...  |  Read More

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