Is the LOI necessary for commercial real estate transactions?
In Commercial Real Estate leases and sales, the LOI or Letter of Intent, has become customary in most negotiations. Some of our Northern Virginia commercial real estate clients have asked, “Why is this necessary?” Some business leaders are of the opinion that the fastest way to close a lease or sale is to insert the agreed upon numbers into the final document and sign it. Remember the old phrase, “We worked out the deal on the back of a napkin?” For some, this type of negotiation may seem to be the easiest and fastest method to close a transaction. Most commercial real estate brokers will advise otherwise.
One unique feature of commercial real estate, is the negotiation of lease or sale language. Commercial Real Estate brokers in Fairfax, Alexandria, Arlington, Tyson’s in the Washington DC area, do not use standard forms! Therefore, experienced negotiation of the terms of a lease or a sale, ahead of the binding document, is critical. This is the reason to hire an experienced Northern Virginia commercial real estate broker.
The good news is that the LOI or Letter of Intent, is not often a binding document. It simply lays out the most important terms of the lease or sale. There are times when the two parties cannot agree on the terms. In those cases, the commercial real estate parties may negotiate the nonbinding LOI but not make it to the final, legally binding document. Those legally binding documents are usually the lease or sales contract. At KCRE, we always advise that your real estate attorney review all documents. The LOI, while it is nonbinding, may contain phrases which could affect your transaction.
Kelley Commercial Real Estate has negotiated lease and sale terms through LOI’s in the City of Fairfax, Fairfax County, Alexandria, Arlington, Loudoun County, Prince William County and in Washington, D.C. for over 25 years. We base the LOI language on the business terms which we have achieved in the various Northern Virginia commercial real estate markets.