It is customary for parties who are negotiating a commercial real estate lease to set forth terms of a potential lease agreement in a non-binding letter of intent (LOI). However, when a broker or lawyer prepares an LOI that includes material terms, and fails to include specific language reserving the parties’ right to walk away from a deal, the LOI may be enforceable. In this article, we define the term “letter of intent” with respect to a commercial lease, set forth the general law as to when terms within LOIs are, and are not, binding, and present decisions on their enforceability to provide guidance to drafters of these documents.
LOIs are, when drafted correctly, non-binding documents that outline the key terms to a business deal. They are utilized with respect to acquisitions, loans and commercial real estate leases, among other types of transactions. An LOI with respect to a lease is a letter between a landlord and tenant, which may or may not be executed, that sets forth the fundamental points for a potential agreement of lease.1
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