A letter of intent (LOI) for a commercial lease is a short document, usually 2 to 5 pages, setting out the business terms a tenant and landlord agree before anyone drafts the lease. It's mostly non-binding. Its real job is locking in rent, term, concessions and key rights while you have the most room to negotiate.
Why the LOI matters more than the lease draft
Once an LOI is signed, the landlord's attorney drafts the lease from it. Anything you left out becomes a fresh ask later, and fresh asks after the handshake look like retrading. Terms you never raised at LOI stage are hard to win back, so the LOI is where most of your money gets decided.
That's why the steps below spend more time on what goes into the LOI than on the formatting.
Six steps from proposal to signed LOI
Step 1: Get competing proposals first
Before you draft anything, collect proposals for two or three spaces that would work. Landlords move faster and give more when they know you have real alternatives.
What goes wrong: tenants fall for one space, tell the broker it's the one, and lose every bit of bargaining power. Keep looking until the LOI is signed.
Step 2: Write down every business term
A complete LOI covers these terms. Missing any of them is how surprises end up in the lease.
- Parties, including which entity signs and who guarantees
- Premises: address, suite and rentable square footage
- Term, commencement date and rent commencement date
- Base rent and escalations
- Lease type and estimated operating expenses per square foot
- Free rent or abatement period
- Tenant improvement allowance or landlord's work, with a delivery date
- Security deposit and any personal guaranty, with limits
- Permitted use and any exclusive use right
- Renewal options and how renewal rent is set
- Assignment and subletting rights
- Signage, parking and access hours
- Contingencies, such as permits or financing
What goes wrong: the TI allowance is listed as a number with no detail on how and when it's paid. Our tenant improvement allowance guide covers the payment terms to add.
Step 3: Say what binds and what doesn't
Most of the LOI should state clearly that it's non-binding and that neither side is committed until a lease is signed. A few provisions are often made binding on purpose:
- Confidentiality of the terms
- An exclusivity period, during which the landlord won't negotiate with other tenants for the space
- Who pays each side's costs if the deal falls apart
What goes wrong: vague wording. Courts in some jurisdictions have treated loosely written LOIs as enforceable agreements. Have an attorney check the non-binding language, especially if you're signing more than one LOI at a time.
Step 4: Negotiate in rounds, not line by line
Send your first draft with every term filled in. The landlord responds with a counter. Go back with your changes in one round, grouped by priority.
Trade, don't concede. A longer term can buy a bigger allowance or lower escalations. A larger security deposit can buy a smaller personal guaranty. Know which three terms matter most to you before round one, and say yes faster on everything else.
What goes wrong: negotiating one term at a time. Each round takes days, and the landlord can tell exactly where you'll fold.
Step 5: Set a deadline and an exclusivity window
Give the LOI an expiration date, often 5 to 10 business days. Ask for an exclusivity period, such as 30 days, so the landlord doesn't sign another tenant while your lease is being drafted.
What goes wrong: no deadline on the landlord's side either. Ask for a target date for the first lease draft, so a signed LOI doesn't sit for weeks while your opening date slips.
Hand it off to the lease
When the lease draft arrives, compare it to the LOI term by term. Anything that changed without discussion is a question for the landlord's attorney. Then work through the rest of the document with a commercial lease review checklist, because the lease will include dozens of clauses the LOI never mentioned.
Our view: a tenant who walks into the lease draft with a detailed LOI saves more money than one who walks in with a better lawyer. The lawyer can only protect what you negotiated.
Get to the LOI with options in hand
The strongest LOIs come from tenants with more than one viable space. On Waltre, you post a requirement once and verified landlords and brokers bring matching space to you, including space that never hits a public listing. You can stay in Stealth Mode while you compare, so your current landlord doesn't find out you're looking.
Put every term in writing. Then negotiate.
Frequently Asked Questions
Is a letter of intent for a commercial lease legally binding?
Usually not, as long as it clearly says so. Most LOIs are non-binding on the business terms but make a few provisions binding, such as confidentiality and exclusivity. Have an attorney check the wording.
What should be included in a commercial lease LOI?
At minimum: parties, premises, term, rent and escalations, lease type, free rent, tenant improvement allowance, security deposit and guaranty, permitted use, renewal options, assignment rights and contingencies.
Who writes the letter of intent, tenant or landlord?
Either side can. Tenants or their brokers often send the first draft, which lets them frame the terms. The landlord then counters.
How long does it take to negotiate an LOI?
Often one to three weeks, depending on how many rounds it takes. Setting an expiration date on each draft and negotiating in grouped rounds keeps it moving.
Can I sign LOIs on more than one space?
Yes, if the LOIs are non-binding and you haven't agreed to exclusivity. Be careful once you grant an exclusivity period, and be upfront about it with your broker.
