CRE Terminology Explained (Part 1): What’s an LOI?
Explaining the LOI (Letter of Intent)
“What’s an LOI?” Good question! It’s easy to get lost in the acronym heavy world of commercial real estate. So, I have decided to write a series on acronyms and common terminology that may be confusing to people who are new to the commercial real estate industry. With that being said, I will kick the series off by explaining the Letter of Intent, or LOI?
What’s an LOI?
The letter of intent can be submitted by either party and symbolizes that the tenant and landlord are serious about the commercial real estate deal. Before any leasing deal takes place, you have a landlord and a potential tenant. The tenant shows interest in a property by asking questions that will initiate negotiations. Once each party has agreed to each other’s basic terms and both parties are closer to moving forward with the deal, the landlord offers an initial lease agreement to the potential tenant. Not always the case, but typically an LOI follows.
Details about the LOI
The LOI summarizes terms that have already been discussed as well as other items in more detail. These details typically include timelines for things like inspections or closing dates, as an example. The letter can either be legally binding or non-binding depending on the agreement. More complex deals typically are bound legally. The simpler the deal, the less binding, legally speaking, but this is not always the case. If a deal is straightforward, the tenant and the landlord may skip the LOI step.What's an LOI? >> New blog series on 'CRE' acronyms and terminology! Click To Tweet
I hope this quick discussion on the letter of intent, or LOI, and its use in the commercial real estate world helps. Please check out my future blog posts, as I will discuss other commonly used real estate acronyms and terms in the months to come. Have a great week!
About Shannon Gilbert – Shannon is a commercial real estate associate for Sperry Van Ness | SouthLand Commercial. She is based in Pensacola, Florida and started working in the real estate industry in 2015. Prior to joining SouthLand Commercial she worked on the residential side of real estate. She is now exploring the various aspects of commercial real estate, and identifying the area of the business in which she would like to specialize. To contact her, you can call her at 850-434-7500, or email her at [email protected]