Letter of Intent
A letter of intent is a preliminary document that outlines the basic terms and conditions under which a buyer is interested in purchasing real estate or a tenant wishes to lease property. While not legally binding like a formal contract, it demonstrates serious interest and serves as a framework for negotiating the final agreement.
Example
“The buyer submitted a letter of intent offering $450,000 for the warehouse, outlining financing terms and a 60-day due diligence period before drafting the purchase contract.”
Memory Tip
Letter of intent shows your 'intention' - it's like raising your hand to say 'I'm seriously interested in making a deal.'
Why It Matters
Letters of intent help streamline negotiations by establishing key terms upfront and showing sellers or landlords that you are a serious prospect. They can also help secure exclusive negotiating periods and prevent the property from being marketed to other potential buyers or tenants.
Common Misconception
Many people believe a letter of intent creates a binding obligation to complete the transaction, when it typically only represents an intention to negotiate in good faith.
In Practice
A retail business submits a letter of intent to lease 2,000 square feet in a shopping center, specifying proposed rent, lease term, and tenant improvement allowances. The landlord accepts the letter of intent and removes the space from the market while attorneys draft the formal lease agreement.
Etymology
From Latin 'littera' meaning 'letter' and 'intentus' meaning 'stretched toward,' describing a document that stretches toward a future agreement.
Common Misspellings
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