Tenant Resources

Leasing a commercial space often comes with uncertainty. Before a tenant commits to a long-term lease, there are critical questions to resolve: How much will the space cost? What expenses are included? How long will the build-out take? What flexibility exists if business needs change?This is where a letter of intent for a commercial lease becomes essential.

A Letter of Intent (LOI) is typically the first formal step in the commercial leasing process. While it is not the lease itself, it plays a major role in shaping everything that follows. Understanding how an LOI works, what it includes, and how it protects tenants can help you enter commercial lease negotiations with clarity and confidence.

What Is a Letter of Intent in Commercial Leasing?

A commercial lease letter of intent is a written document that outlines the key business terms a landlord and tenant agree to before drafting a formal lease agreement.

In simple terms, an LOI helps both parties confirm alignment before legal documents are prepared.

Key characteristics of a leasing letter of intent include:

• A non-binding document that summarizes major lease terms
• A framework used to guide the final lease agreement
• A tool to reduce misunderstandings during commercial lease negotiation
• A way to save time by resolving business terms early

An LOI allows tenants to evaluate whether a space and its financial structure truly support their business goals before committing to a legally binding lease.

Key Terms Every Commercial Lease LOI Should Include

A well-prepared commercial LOI document should clearly define the most important lease terms. While every deal is different, most LOIs include the following core components.

Common LOI Terms and What They Mean

Each of these items directly impacts cash flow, operational planning, and long-term flexibility. Clarifying them at the LOI stage helps prevent surprises once the lease is drafted.

Additional Commercial LOI Considerations That Impact Your Business

Beyond basic financial terms, several additional details can significantly affect how well a space works for your business over time.

Important considerations often addressed in a letter of intent commercial lease include:

• Lease Commencement Date: Build-out timelines depend on permitting, design approvals, and construction scope. An LOI helps set realistic expectations before work begins.
• Renewal Options: Renewal terms define future flexibility and explain how rent will be determined at extension periods.
• Financial Review: Landlords often request financial statements to assess rent affordability and long-term viability.
• Zoning and Capacity Limits: Parking ratios, HVAC capacity, and occupancy limits must align with how the space will be used.

Addressing these issues early protects tenants from operational constraints that could surface after move-in.

Frequently Asked Questions About Commercial Lease LOIs

Is a letter of intent legally binding?

In most cases, a letter of intent is non-binding. However, certain sections, such as confidentiality or exclusivity clauses, may carry legal weight. Always review LOI language carefully.

Can LOI terms change in the lease?

Yes. While the LOI sets expectations, the formal lease governs final terms. Significant changes should be discussed before execution.

Who prepares the LOI?

A Letter of Intent can be drafted by either the tenant or the landlord. In many cases, it is prepared by the tenant or their broker after identifying a space, though landlords may also provide an initial version. 

Using an LOI to Strengthen Your Commercial Lease Outcome

A well-structured LOI gives tenants leverage before legal commitments are made. It creates clarity, reduces risk, and ensures business priorities are addressed early in the leasing process.

Understanding how a letter of intent for a commercial lease works allows tenants to approach negotiations with stronger positioning and fewer surprises.

At Kenwood Management, our team helps tenants navigate LOIs, evaluate lease terms, and secure commercial spaces that align with long-term business objectives. If you need help reviewing or negotiating a commercial lease LOI, contact our team to start your leasing strategy with confidence.