A preliminary, non-binding agreement outlining the basic terms of a proposed commercial lease before formal lease drafting begins. The LOI establishes negotiating parameters but is not a binding contract.
LOIs typically address: rent, term, tenant improvement allowance, free rent, CAM structure (gross, NNN, or modified), and key tenant protections. Because the LOI is non-binding, landlords may attempt to walk back CAM-related concessions during formal lease drafting.
A LOI confirmed a 4% management fee cap and controllable CAM cap of 5%. During lease drafting, the landlord's attorney omitted the management fee cap and converted the CAM cap to a non-cumulative structure. The tenant signed without comparing the executed lease to the LOI.
Compare the executed lease against every term in the LOI before signing. If the lease diverges from the LOI on financial terms, do not assume it was an oversight - negotiate the discrepancy before execution.
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Start Free AuditThis page provides general educational information. It is not legal advice and may not reflect the most current law in your state. Consult a licensed attorney for advice specific to your situation.