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Basic Elements of Letters of Intent [Lowndes Leasing Lawyers]

August 11, 2022

Letters of intent (LOIs) are used to summarize the material terms of a proposed transaction, typically involving the leasing or sale of real property. Sometimes called term sheets, letters of interest or deal sheets, LOIs are usually prepared by one of the parties to the transaction, or by a leasing agent or broker for one of the parties.

LOIs are important because they include terms that will be incorporated into a formal and binding lease or sales contract with more detail about the proposed transaction. An attorney is likely be involved in preparing or negotiating the lease or sales contract, so each party should have an attorney review and comment on the proposed LOI before it is signed.

Once signed, LOIs are not supposed to be subject to change absent some compelling reason, such as the occurrence of a significant new circumstance or the discovery of new information. Attempting to otherwise renegotiate the deal after an LOI has been signed can adversely affect a party’s credibility, can strain relations between the parties, and will likely be met with significant resistance. That is why it is important to get the LOI right from the start.

Although typically non-binding in most respects, sometimes LOIs contain confidentiality or other clauses that the parties want to be binding. This is fine provided the LOI is clear as to what is binding and what is not, as well as what the remedy is for the breach of a binding clause.

In addition to confidentiality clauses, all LOIs should contain the proper names, states of formation and addresses of the parties, along with a description of the affected premises or property. If brokers were involved, the LOI should identify them, what their commissions are and when they are payable. For a lease, it is possible that brokerage commissions may be payable if the tenant exercises a renewal option in the lease, so that should be addressed if applicable. If the tenant or buyer has an inspection or permitting period, that should be mentioned. It is also customary for a tenant or buyer to have a review period for title and survey matters, and sometimes the LOI will describe the process by which title objections are raised and addressed. Events of default and remedies should be included.

Some of the other basic elements of an LOI for a lease are as follows:

• Amount of security deposit;

• Rent amounts (including adjustments, concessions and pass-through expenses);

• Rent commencement date;

• Guarantor (if any) of tenant’s obligations;

• Landlord’s and tenant’s work, including any tenant improvement allowances;

• Delivery date for premises, including condition of premises upon delivery;

• Other conditions to tenant’s occupancy;

• Permitted uses and tenant’s use restrictions;

• Exclusive uses granted to tenant;

• Tenant’s operating covenants;

• Assignment and subletting;

• Renewal or extension options;

• Tenant’s right of first refusal or option to purchase, if any;

• Maintenance, repair and replacement obligations;

• Alterations;

• Tenant’s signage rights;

• Subordination, non-disturbance and attornment;

• Allocation of costs.

An LOI for the sale of property will address similar types of concerns tailored for that type of transaction, and can include the following:

• Purchase price;

• Earnest money deposit, including identity of escrow agent and timing for furnishing same if being lodged in installments;

• Due diligence documents to be delivered by seller to buyer;

• Closing date;

• Condition of property;

• Conditions to closing;

• Allocation of closing costs, prorations and adjustments;

• Form of deed;

• Assignment of leases, contracts, etc.

An LOI should include enough material terms to guide the party or attorney preparing the lease or sales contract and preclude potential disagreements over matters of significance, without becoming overly complicated and burdensome. This is a balancing test.

LOIs can be of any length… the more complex the deal is, the longer the LOI is likely to be. Sometimes a party may be tempted to state that other terms of a lease or sales contract not specifically mentioned in the LOI shall be determined based on “custom” or “practice” in similar transactions in that locality. Before doing that, the party should make every attempt to describe with specificity any term that is important to them.

An attorney should review the proposed LOI to ensure it contains sufficient material terms for the proposed transaction, lacks internal inconsistencies, and avoids ambiguities and other pitfalls. The attorney may also point out potential legal issues of which the client may be unaware. Given that LOIs are usually short documents, it should not be very expensive for the client to run it by their attorney beforehand, which can save the client money down the road.

If a party is engaged in multiple lease or sales transactions over time, it is a good idea to create a form or template of an LOI that contains the terms the party typically wants in all similar transactions. The template can contain blanks that get completed on a deal-by-deal basis as individual LOIs are prepared. It is useful for the party to involve their attorney in the creation of such a form, since that can identify potential issues at the front end and reduce the attorney’s fee for reviewing individual LOIs.

Sometimes attorneys are given a signed LOI and told to prepare or negotiate a lease or sales contract. Clients think they can save on attorneys’ fees by not involving the attorney earlier, but this delay can end up being very expensive. Rectifying mistakes in an LOI is difficult (if not impossible), and such an effort not only reflects poorly on the party who made the mistake, but also increases their fees.

For example, an LOI may specify that one party obtains its title insurance through its own title company or agent, but the other party pays for it. Many parties (including their leasing agents and brokers) do not consider that title insurance premiums in Florida can be negotiated, frequently resulting in substantial savings. The party obtaining the title insurance has no incentive to negotiate the premium if the other party agreed to pay it. Even worse, they may negotiate to obtain and keep the savings even though the other party is paying the premium. An attorney reviewing a proposed LOI should catch and address this.

LOIs are useful tools for parties, leasing agents, brokers and attorneys, and if thoughtfully prepared, can save them both time and money when preparing and negotiating the applicable lease or sales contract.

Gary M. Kaleita is a shareholder at Lowndes and has been certified by the Florida Bar as a specialist in real estate law since 1993. He is a member of the firm’s Commercial Leasing Group and can be reached by phone at 407-418-6334 or

This article is informational only. You should consult an attorney before acting or failing to act. The law may change rapidly and no warranty is given. LOWNDES DISCLAIMS ALL IMPLIED WARRANTIES AND WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. ALL ARTICLES ARE PROVIDED AS IS AND WITH ALL FAULTS. Consult a Lowndes attorney if you wish to establish an attorney/client relationship.

With more than 30 years of experience in real estate law, including over 20 years as a Board-certified expert in the field, Gary Kaleita has acquired the ability to navigate the complexities of sophisticated real estate deals with relative ease.

Gary has a wide variety of experience in real estate development, finance and transactions, condominiums, property owners’ associations, commercial leasing, commercial lending, and title insurance.

Gary enjoys a reputation for anticipating and avoiding problems, rather than merely reacting to them. He has years of experience handling purchases, sales and financings of commercial and residential projects, including office, industrial, retail, multi-family, single-family, condominium, resort, hotel and golf course properties. Gary has prepared and negotiated contracts for sale and purchase, performed due diligence investigations, and handled all aspects of closings, including issuance of title insurance and legal opinions. He has also performed tax free exchanges (both forward and reverse) under Section 1031 of the Internal Revenue Code, and has handled closings for housing revenue bond financing transactions with the Florida Housing Finance Corporation and various local housing finance authorities.

In the area of real estate development, Gary has assisted developers in obtaining land use approvals, plat approvals and permits for various developments from a number of jurisdictions in Central Florida, including planned developments (PD’s) and Developments of Regional Impact (DRI’s). He has drafted and negotiated complex land use documents, including development agreements, cost-sharing agreements, declarations of covenants, conditions, restrictions and easements. He also has experience in mall and shopping center developments, including outparcels, and has assisted developers with the selection, formation and operation of business entities, including commercial and residential property owners associations. He has extensive experience with the formation and operation of both commercial and residential condominiums as well.

In addition, Gary has established somewhat of a boutique practice by acting as local counsel to help out-of-state lenders, investors and law firms navigate the complexities of Florida real estate law. He is frequently engaged by large national and international law firms needing assistance on a variety of issues for their clients doing business in Florida. Gary regularly provides advice on Florida law and custom pertaining to purchase and sale contracts as well as loan documents, addresses local due diligence issues, answers questions involving titles, surveys and title insurance, and provides Florida legal opinions.

Not just another real estate lawyer, before pursuing his career in law Gary served as a U.S. Naval officer on active duty for 4 years in the Mediterranean Sea, first with a patrol gunboat squadron in Italy and then at a communications station in Greece. During this period he traveled extensively throughout Europe, the Middle East and North Africa. He believes his military experience is the source of the practical approach he has developed to problem solving.

Gary also took the initiative, after a homeowner in his own neighborhood was mauled by a Florida black bear in 2013, of researching what his homeowners’ association could do to limit the likelihood of future attacks. In the process, he became an expert in the subject of “bear-wise” communities and drafted a policy that his own homeowners’ association adopted, thereby becoming the first residential community to be officially recognized as bear-wise by the Florida Fish and Wildlife Conservation Commission (FWC). He has since written and spoken extensively on this subject, serves on the FWC’s Central Bear Management Unit Stakeholder Group, and has become a resource for FWC to educate other communities on the importance of bear-wise practices in areas of Florida containing black bear habitat.

Gary focuses on finding pragmatic solutions to complex problems, recognizing that clients want sensible and realistic advice in a timely manner so they can go about their business.

Chambers USA (2015)* reports that Gary has substantial experience acting as lender’s counsel and is acclaimed by market sources as an “extremely responsive, very practical and reasonable” practitioner.

*We make no guarantees or promises that the reader will realize the same or similar results

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