How do you write a letter of intent for a lease

How do you write a letter of intent for a lease is a struggle for inexperienced brokers representing clients or unrepresented potential tenants? Once a potential tenant finds a commercial lease space, the process to negotiate with the landlord begins.

A letter of intent (LOI) is a document declaring one party’s preliminary commitment to do business with another. The letter outlines the key points of a deal that will be negotiated between all parties involved.

LOIs are useful when two parties, usually landlord and potential tenant, work together to hammer out the broad strokes before resolving the finer points.

Letter of Intents can be drafted and presented by either party. The receiving party can accept the terms or redline and revise the words to send back to the original sender.

Key Points on a Letter of Intent Include:

  •  Tenant Improvement Allowance (TI)
  • Rent Abatement
  • Personal Guaranty
  • Rent structure
  • Term of Lease
  • Options to extend
  • Permitted Use/Exclusive Use
  • Rent Commencement Date
  • Landlords Delivery Condition
  • Lease Assignment Rights
  • Security Deposit
  • Advanced Rent
  • Repairs and Maintenance
  • Brokerage Disclosure and Commission

Dominique Maddox, a Restaurant Broker and Founder of EATS Restaurant Brokers says, “the letter of intent is an essential part for a potential tenant to address all concerning issues before signing a new lease.

Landlords pay lawyers to draft leases that protect all their concerns. In this business, I always say the landlord is not your friend. Potential tenants need to have a professional on your side when negotiating the lease”.

EATS Brokerssuggest hiring a professional Business Broker or Restaurant Broker to review the following items on a Letter of Intent (LOI):

  • Personal Guarantees- how long will the tenant be a personal guarantor.
  • Exclusivity-does the tenant have any protection from incoming tenants competing with their cuisine.
  • Covenants, POA rules, and regulations
  • Zoning issues
  • Subordination
  • SBA leases
  • Renewals- Provides information on renewals and rates.
  • Non-Disturbance
  • Dispute resolution

The detailed information to consider when evaluating a new lease can be overwhelming to an inexperienced restauranteur or real estate professional.  Most landlords hire property management companies to negotiate new leases. These hired professionals’ job is to get the landlord the best deal possible.

To all potential tenants, remember when you call the “For Lease” sign on a vacant restaurant space, you are letting the landlord know you are representing yourself in lease negotiations.

For more information on restaurant leasing and other available consulting services or restaurant valuations, contact Dominique Maddox at 404-993-4448 or by email at [email protected].

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