What is a letter of intent (LOI) for commercial leasing?
A commercial lease refers to a legal agreement between a landlord and a tenant, to rent a commercial property, such as a building or land, for industrial, retail, or office use. Commercial property leases are prepared with a longer tenure, as compared to residential leases that usually have a tenure of 11 months. Before getting into a final and definitive contract, the parties usually sign a letter of intent, which is a document that contains a summary of the leasing terms and informs each party about the details of the agreement.
What is the purpose of the Letter Of Intent?
A Letter Of Intent is a document that forms the basis of the final lease deed between the tenant and the landlord. In other words, the Letter Of Intent outlines the broad contours of the lease agreement that is eventually signed by the landlord and the tenant. If you are taking a space in a building on rent to start your business, the landlord may ask you for a Letter Of Intent from you which will give him an idea of your seriousness to rent the space and also what will be your exact requirements. Moreover, the letter of intent helps in addressing any commercial issues between the parties, while validating their commitment to the contract.
Although you can ask your broker to prepare the Letter Of Intent, it is good to know what goes inside a Letter Of Intent.
What does a Letter Of Intent contain?
- A statement from your side stating your intent to lease space inside the building.
- A brief description of your business including the business model, different business activities, and a small history about the start date.
- A brief description of your products and services including the prices and packaging.
- A brief description of the markets where you sell your products or deliver your services.
- The number of employees that you will station in the building and any near-term hiring plan.
- The equipment and machinery that you will keep and use in the rented space.
- Your business hours and any plans to change it in the near future.
- If you have any branches, it will be good to include pictures of those in the Letter Of Intent.
- Your contact details and the best possible place for further meetings.
You can ask the landlord if he has a Letter Of Intent template and you can just fill out the details. You can also ask for a Letter Of Intent given by the other tenants to the landlord and get an idea as to how you should write one.
Letter Of Intent Sample format
Dear Mr. XYZ,
Our company PQR Ltd will like to submit this Letter Of Intent to communicate our interest in leasing space in your mall.
We are conducting our business with the brand name ‘STU’ which is the number one brand for pizzas. We have been in the business of serving pizzas since 2010. We have a number of varieties of pizzas and wraps. We also sell shakes and other beverages.
As of now, our pizzas sell in the price range of Rs 100-300 and beverages in the price range of Rs 50-200. Our customers are usually youngsters who can have the pizza at the outlet itself or get it packed to eat at home or office.
The outlet that we plan to open in your mall will be about 30 feet by 20 feet which will include the kitchen area and a few tables and chairs for the customers to sit and eat. Our equipment will include an oven and a gas-operated stove. We will also keep a small fridge and a medium-sized freezer.
The outlet will be manned by 7 employees including the ones in the kitchen and the reception. The outlet opening time will be 10 and the closing time will be 11 pm on all days including Sundays.
We hope to be able to complete all the leasing formalities and set up our outlet in your mall at the earliest. In case you find this Letter Of Intent in order, please feel free to contact us on 011-1111111 from Monday to Friday between 10 and 5 pm. We can also set up a meeting in your mall at a desired date and time.