--- title: "Commercial Real Estate LOI: Complete Guide [2026]" description: "How to write a commercial real estate LOI for lease or purchase. Includes CRE letter of intent template, key provisions, negotiation tips, and common mistakes to avoid." canonical: "https://acquisitionstars.com/loi-guides/loi-commercial-real-estate" author: "Alex Lubyansky" firm: "Acquisition Stars" practice: "M&A and securities law" office: "Novi, Michigan (serves clients nationwide)" contact: "consult@acquisitionstars.com | 248-266-2790" --- # Commercial Real Estate Letter of Intent Commercial Real Estate Legal Guide The LOI sets the terms before you spend money on attorneys. Get it wrong, and you've negotiated yourself into a bad deal before the lease is even drafted. Lease LOI Purchase LOI Template Common Mistakes [Get LOI Reviewed](https://acquisitionstars.com/consultation) See Template ## Definition: Commercial Real Estate Letter of Intent A preliminary, typically non-binding agreement outlining the key business terms of a commercial lease or property purchase before formal legal documents are drafted. In CRE transactions, the LOI establishes rent/price, term, tenant improvements, exclusivity periods, and contingencies-creating the framework that attorneys use to draft the definitive lease or purchase agreement. 01 Why CRE Deals Start With an LOI 1 LOI Submitted Tenant/buyer proposes terms 2 Negotiation Counter-offers exchanged 3 LOI Signed Terms locked (usually non-binding) 4 Lease/PSA Drafted Attorneys document the deal #### Why This Order Matters Commercial lease/purchase documents can cost $5,000-$25,000+ in legal fees. The LOI ensures both parties agree on business terms BEFORE spending money on attorneys. Negotiate the LOI carefully-terms set here become your negotiating floor. 02 For Tenants & Landlords Commercial Lease LOI Provisions 1 ### Rent Terms Must Include: - • Base rent ($/SF/year or monthly) - • Rent escalations (annual increases) - • NNN, Modified Gross, or Full Service - • CAM cap (if applicable) Sample Language: "Base Rent: $28.00/SF/year NNN, with 3% annual escalations. Estimated NNN charges: $8.50/SF/year, subject to CAM cap of 5% annual increase." 2 ### Lease Term & Options Must Include: - • Initial term length - • Renewal options (number and length) - • Renewal rent (FMV, fixed, or CPI-based) - • Commencement date or trigger Sample Language: "Initial Term: 5 years. Two (2) five-year renewal options at 95% of then-prevailing FMV, exercisable with 9 months' notice." 3 ### Tenant Improvement Allowance (TI) NEGOTIATE HARD Key Terms: - • TI allowance amount ($/SF) - • Who manages construction - • Deadline to use allowance - • Above-standard work responsibility Sample Language: "Landlord shall provide TI allowance of $45.00/SF. Tenant-managed buildout. Unused allowance may be applied to rent. Allowance expires 12 months after lease execution." 4 ### Free Rent / Abatement COMMON CONCESSION Typical Structures: - • Months of free rent (upfront or spread) - • Base rent only or NNN included - • Burnoff on early termination Sample Language: "Tenant shall receive 4 months of Base Rent abatement, applied to months 1-4. Tenant responsible for NNN during abatement period." 5 ### Use Clause & Exclusivity RETAIL CRITICAL Key Terms: - • Permitted use (be specific!) - • Exclusive use rights - • Radius restrictions - • Co-tenancy requirements Sample Language: "Permitted Use: Coffee shop and cafe. Exclusive: No other tenant in the center shall sell coffee as a primary use. Landlord represents no existing exclusive conflicts." 03 For Buyers & Sellers CRE Purchase LOI Provisions $ ### Purchase Price & Terms - • Purchase price - • Earnest money deposit amount - • Financing contingency (if any) - • Assumption of existing debt (if applicable) "Purchase Price: $4,250,000. Deposit: $100,000 within 3 business days of LOI execution, refundable during Due Diligence Period." ### Due Diligence Period - • Length of DD period (30-60 days typical) - • Access to property and records - • Buyer's right to terminate - • Deposit disposition on termination "Due Diligence Period: 45 days from PSA execution. Buyer may terminate for any reason during DD Period and receive full refund of Deposit." ### Timeline & Closing - • PSA execution deadline - • Closing date - • Extension rights (if any) - • Prorations (taxes, rents, deposits) "PSA to be executed within 10 business days. Closing: 30 days after DD Period expiration. One 15-day extension available for $25,000 non-refundable deposit." 04 Sample Document Commercial Lease LOI Template ### Letter of Intent - Commercial Lease TEMPLATE **[Date]** **[Landlord Name]** [Address] Re: Letter of Intent - **[Property Address]** Dear **[Landlord/Representative]**: This Letter of Intent ("LOI") sets forth the principal terms upon which **[Tenant Name]** ("Tenant") proposes to lease space from **[Landlord Name]** ("Landlord") at the above-referenced property. This LOI is non-binding except for the provisions expressly stated as binding below. 1. PREMISES Approximately **[_____]** rentable square feet located at **[Suite/Unit]**. 2. LEASE TERM Initial Term: **[___]** years, commencing on **[Date or "Substantial Completion of TI"]**. Renewal Options: **[Number]** option(s) of **[___]** years each at **[FMV/Fixed Rate/% Increase]**. 3. BASE RENT Year 1: $**[___]**/SF/year (**[NNN/Modified Gross/Full Service]**) Escalations: **[___]**% annual increase OR CPI-based adjustment 4. ADDITIONAL RENT (NNN) Estimated: $**[___]**/SF/year for property taxes, insurance, and CAM. CAM Cap: Annual increases not to exceed **[___]**% (controllable expenses only). 5. TENANT IMPROVEMENT ALLOWANCE Landlord shall provide $**[___]**/SF for tenant improvements. Buildout managed by: **[Landlord/Tenant]** Unused allowance: **[Forfeited/Applied to Rent/Paid to Tenant]** 6. FREE RENT **[___]** months of Base Rent abatement, applied to months **[___]**. 7. SECURITY DEPOSIT $**[___]** (equivalent to **[___]** months' rent), reduced to **[___]** months after Year **[___]** if no defaults. 8. PERMITTED USE **[Specific use description]** and any lawful related uses. 9. EXCLUSIVITY (Binding) Landlord agrees not to negotiate with other parties for the Premises for **[___]** days from LOI execution. 10. CONFIDENTIALITY (Binding) Both parties agree to keep the terms of this LOI confidential. 11. LOI EXPIRATION This LOI expires if not signed by both parties by **[Date]**. This LOI is intended to facilitate negotiations and, except for Sections 9, 10, and 11, is not intended to create any binding obligation on either party. TENANT: _______________________ Signature / Date LANDLORD: _______________________ Signature / Date 05 Avoid These CRE LOI Mistakes That Cost Money 1 ### Vague TI Language "Landlord will provide standard buildout" means nothing. Specify exact $/SF, who manages construction, what's included (HVAC, electrical, flooring), and what happens to unused allowance. 2 ### No CAM Cap NNN charges can balloon unpredictably. Always negotiate a cap on controllable CAM increases (typically 3-5% annually). Without this, your Year 5 occupancy cost could be 30% higher than projected. 3 ### Forgetting Personal Guaranty Terms If landlord requires a personal guaranty, negotiate its scope in the LOI. Push for: limited duration (burns off after Year 2-3), capped amount, or "Good Guy" guaranty that ends if you vacate properly. 4 ### Unclear Renewal Terms "Renewal at fair market value" invites disputes. Specify: how FMV is determined, what comparables are used, whether there's a floor/ceiling, and the notice period required. 5 ### Skipping Assignment Rights If you might sell your business, you need the right to assign the lease. Negotiate this in the LOI-landlords often resist adding it later. At minimum, get assignment to affiliates and potential acquirers. 06 Pro Tips CRE LOI Negotiation Strategy #### For Tenants - → Get multiple LOIs out simultaneously-leverage creates options - → Ask for more TI than you need-it's the easiest thing for landlords to give - → Free rent is often easier to get than lower base rent (optics for landlord) - → Include a kick-out clause if you're concerned about the location #### For Landlords - → Verify tenant financials before signing LOI-avoid wasted legal fees - → Keep exclusivity periods short (7-14 days max) - → Include tenant's use clause in LOI to avoid surprises - → Specify lease form (your form, not tenant's) in the LOI ## Get Your CRE LOI Reviewed Before you sign, have experienced M&A counsel review your commercial real estate LOI. We catch the issues that cost tenants and landlords money. [Schedule LOI Review](https://acquisitionstars.com/consultation) [Call: (248) 266-2790](tel:+1-248-266-2790) Acquisition Stars • acquisitionstars.com • alex@acquisitionstars.com ### Commercial real estate LOI? Get it reviewed. CRE letters of intent have unique terms around lease assignments, CAM caps, and exclusivity. Our attorneys review the language before you commit. [Request CRE LOI Review →](https://acquisitionstars.com/services/loi-review) ### Related LOI Resources #### M&A LOI Template Business acquisition LOI templates and guidance. #### Binding vs Non-Binding Which provisions should be binding in your LOI. #### Exclusivity Periods How to structure exclusivity in negotiations. --- Source: https://acquisitionstars.com/loi-guides/loi-commercial-real-estate Markdown version generated for machine readers. Canonical HTML at the source URL.