LOI vs. Lease
Published 2026-08-11
A letter of intent (LOI) is a short summary of the business terms of a proposed lease — rent, term, allowances, delivery condition — that landlord and tenant negotiate before lawyers draft the lease itself. The lease is the binding contract; the LOI is usually non-binding on the deal terms, though specific provisions in it can bind.
What an LOI typically covers
- Premises, square footage, and delivery condition
- Base rent, escalations, and any percentage rent
- Term, renewal options, and expected commencement
- Tenant improvement allowance and other concessions such as free rent
- Expense structure (gross vs. net) and any legal points the parties already know they care about — exclusives, signage, assignment
A well-built LOI front-loads the economics so that lease drafting becomes a translation exercise rather than a second negotiation.
Which parts can bind
Most LOIs state that they are non-binding except for named provisions — commonly confidentiality, exclusive negotiation for a stated period, and sometimes broker obligations. The label at the top is not the whole story: what the parties actually wrote, and how they behaved afterward, matters. Careful LOIs therefore say explicitly that no lease exists, and no party is obligated to enter one, until both sides execute a definitive agreement.
What to watch for
The most common failure mode is drift: the executed lease quietly departs from the LOI on a point the business team thought was settled — the cap on operating expenses, the delivery condition, who bears the cost of code compliance. Keeping the LOI in the deal file and checking the final draft against it is the discipline that catches this before signature rather than after.
In your documents
Deal files accumulate LOIs, drafts, and amendments alongside the executed lease, and the recurring question is which version governs and where a term changed along the way. During due diligence, Sevrel is designed to answer questions across that indexed deal-room material with links back to the retrieved sources — with the standing caveat to verify material terms against the executed documents.