Writing A Letter of Intent for Buying or Selling Commercial Property: A Guide for Novice Investors

Letter of Intent For Commercial Property

A letter of intent for purchase of commercial real estate serves as a roadmap for the transaction and can be a valuable tool in the buying and selling process. It helps both the buyer and seller to clarify their understanding of the deal, negotiate any outstanding issues, and address any contingencies or conditions that need to be met before the transaction can proceed. 

Need to write one but have no idea where to start? In this article, we’ve provided you with some examples that you can use as a guide in crafting your own letter of intent. Read on to learn more. 

When Is A Letter Of Intent Used In Commercial Property?

A Letter of Intent (LOI) is commonly used in real estate transactions when the parties involved want to establish the basic terms and conditions of a commercial property potential sale or purchase before they enter into a formal contract.

The LOI serves as an initial written offer to buy or sell the property and typically includes important information, such as the proposed purchase price, financing terms, due diligence period, and closing date. It may also include other important terms and conditions, such as contingencies related to zoning or environmental issues, or requirements for property inspections.

An LOI can be used in a variety of commercial property transactions, including the purchase or sale of office buildings, retail spaces, warehouses, and other types of commercial real estate. It can also be used for leasing transactions, to establish the basic terms of a lease agreement before the parties invest more time and money in the negotiation process.

While the LOI is not a binding agreement, it can help both the buyer and seller to clarify their understanding of the transaction and to negotiate any outstanding issues or contingencies before they proceed with a formal contract.

How to Write A Letter Of Intent For Buying Or Selling A Commercial Real Estate

Here are some steps you can follow to write a Letter of Intent (LOI) for buying or selling commercial real estate:

  1. Begin with a heading: Start with a professional heading that includes the date, the parties involved, and the property description.
  2. Introduction: In the first paragraph, introduce the parties involved, state the purpose of the LOI, and summarize the main points of the proposed transaction.
  3. Purchase Price and Terms: Specify the purchase price and any proposed payment terms, including down payment, financing terms, and any other relevant details.
  4. Due Diligence Period: State the length of the due diligence period, during which the buyer can conduct inspections, review documents, and perform any other necessary investigations to ensure the property meets their requirements.
  5. Closing Date: Include a proposed closing date, by which time the buyer must complete the purchase.
  6. Contingencies: Specify any contingencies or conditions that must be met before the transaction can be completed, such as obtaining financing or satisfying environmental or zoning requirements.
  7. Confidentiality: Include provisions for confidentiality, to ensure that any sensitive information about the property or the transaction remains private.
  8. Termination: Include provisions for termination, outlining the circumstances under which either party may terminate the LOI and what the consequences of termination may be.
  9. Signature: Include signature lines for the parties involved to sign and date the LOI.

Things You Should and Should Not Include In A Letter of Intent For Buying Or Selling A Commercial Real Estate

When drafting a Letter of Intent (LOI) for buying or selling commercial real estate, there are certain things that you should include and others that you should avoid. Here are some key considerations:

Things You Should Include:

  • Property Description: A clear and concise description of the property being bought or sold, including the address and any relevant details such as the size, zoning, and permitted uses.
  • Purchase Price and Terms: The proposed purchase price and any proposed payment terms, including down payment, financing terms, and any other relevant details.
  • Due Diligence Period: The length of the due diligence period, during which the buyer can conduct inspections, review documents, and perform any other necessary investigations to ensure the property meets their requirements.
  • Closing Date: A proposed closing date, by which time the buyer must complete the purchase.
  • Contingencies: Any contingencies or conditions that must be met before the transaction can be completed, such as obtaining financing or satisfying environmental or zoning requirements.
  • Confidentiality: Provisions for confidentiality, to ensure that any sensitive information about the property or the transaction remains private.

Things You Should Not Include:

  • Legally Binding Language: An LOI is a non-binding document, and as such, should not include any legally binding language. Instead, use language that is conditional, such as “the parties agree to negotiate in good faith,” or “this LOI is not intended to be a binding agreement.”
  • Extensive Legal Terms: Keep the language of the LOI clear and concise, and avoid including extensive legal terms or jargon that may confuse or complicate the transaction.
  • Specific Remedies for Breach: Since the LOI is non-binding, it should not include specific remedies for breach, such as liquidated damages or specific performance. Instead, focus on outlining the general terms and conditions of the transaction.
  • All Details of the Transaction: An LOI should be a summary of the main points of the proposed transaction, and should not include every single detail. Leave the specific details for the formal purchase agreement.

Overall, the LOI serves as an important starting point for commercial real estate transactions, outlining the basic terms and conditions of the deal and providing a roadmap for the parties to negotiate a formal contract. It would be best to consult with a real estate attorney or broker to ensure that all important elements are included and that the LOI is properly drafted.

Samples and Templates

Here are some examples of letter of intent for buying or selling a commercial real estate:

Sample 1

[Date]

[Buyer Name and Address]

[City, State Zip Code]

[Seller Name and Address]

[City, State Zip Code]

RE: Letter of Intent to Purchase [or Sell] Commercial Real Estate Property

Dear [Seller/Buyer Name],

This letter serves as a non-binding Letter of Intent for the purchase [or sale] of the commercial real estate property located at [Property Address], as proposed by [Buyer/Seller Name] (“the Parties”).

  1. Property Description: The property is described as [insert description of the property].
  2. Purchase Price and Terms: The proposed purchase price for the property is [insert proposed purchase price]. The payment terms will be as follows: [insert details of the proposed payment terms, such as down payment, financing terms, and any other relevant details].
  3. Due Diligence Period: The due diligence period will be [insert length of time], during which the Buyer will have the right to inspect and review all relevant documents and records related to the property.
  4. Closing Date: The proposed closing date is [insert date], which is subject to adjustment as necessary to ensure the timely completion of all necessary steps and requirements.
  5. Contingencies: The purchase [or sale] of the property is contingent upon [insert any conditions that must be met before the transaction can be completed, such as obtaining financing or satisfying environmental or zoning requirements].
  6. Confidentiality: The Parties agree to maintain confidentiality regarding all information related to the transaction, including the property and all related financial, legal, and other sensitive information.
  7. Brokerage: The Parties acknowledge that [insert brokerage name and address] is serving as the exclusive real estate brokerage firm representing [insert Buyer/Seller name] in connection with the purchase [or sale] of the property.

This LOI is intended to be a summary of the proposed transaction and is not intended to be a binding agreement. The Parties agree to negotiate in good faith and to use their best efforts to reach a final agreement in accordance with the terms and conditions set forth herein.

If you have any questions or require further information, please do not hesitate to contact us.

Sincerely,

[Buyer/Seller Name]

[Buyer/Seller Signature]

Sample 2

[Date]

[Buyer Name and Address]

[City, State Zip Code]

[Seller Name and Address]

[City, State Zip Code]

RE: Letter of Intent to Purchase [or Sell] Commercial Real Estate Property

Dear [Seller/Buyer Name],

This letter sets forth the general terms and conditions for the purchase [or sale] of the commercial real estate property located at [Property Address], as proposed by [Buyer/Seller Name] (“the Parties”).

  1. Property Description: The property is described as [insert description of the property].
  2. Purchase Price and Terms: The proposed purchase price for the property is [insert proposed purchase price]. The payment terms will be as follows: [insert details of the proposed payment terms, such as down payment, financing terms, and any other relevant details].
  3. Due Diligence Period: The due diligence period will be [insert length of time], during which the Buyer will have the right to inspect and review all relevant documents and records related to the property.
  4. Closing Date: The proposed closing date is [insert date], which is subject to adjustment as necessary to ensure the timely completion of all necessary steps and requirements.
  5. Contingencies: The purchase [or sale] of the property is contingent upon [insert any conditions that must be met before the transaction can be completed, such as obtaining financing or satisfying environmental or zoning requirements].
  6. Confidentiality: The Parties agree to maintain confidentiality regarding all information related to the transaction, including the property and all related financial, legal, and other sensitive information.
  7. Termination: This LOI is not binding and may be terminated by either Party at any time and for any reason. In the event of termination, neither Party shall have any further obligations or liabilities to the other, except as otherwise provided herein.

This LOI is intended to be a summary of the proposed transaction and is not intended to be a binding agreement. The Parties agree to negotiate in good faith and to use their best efforts to reach a final agreement in accordance with the terms and conditions set forth herein.

If you have any questions or require further information, please do not hesitate to contact us.

Sincerely,

[Buyer/Seller Name]

[Buyer/Seller Signature]

Key Takeaways

  • A Letter of Intent (LOI) is commonly used in real estate transactions when the parties involved want to establish the basic terms and conditions of a commercial property potential sale or purchase before they enter into a formal contract.
  • The LOI serves as an initial written offer to buy or sell the property and typically includes important information, such as the proposed purchase price, financing terms, due diligence period, and closing date.
  • It would be best to consult with a real estate attorney or broker to ensure that all important elements are included and that the LOI is properly drafted.