Letter of Intent (LOI)
A Letter of Intent is a preliminary agreement that outlines the key business terms of a proposed lease: rent, lease term, renewal options, tenant improvement allowance, permitted use, and other critical deal points. While typically non-binding, the LOI establishes the framework that attorneys use to draft the formal lease. In NYC, LOI negotiation usually takes 2-4 weeks.
Why It Matters for Operators
The LOI is your most powerful negotiating tool. Every major business term should be resolved at this stage—once attorneys begin drafting the lease, changes become exponentially more expensive and time-consuming. A well-negotiated LOI can save $10,000-$30,000 in legal fees and weeks of back-and-forth. Conversely, a weak LOI locks you into unfavorable terms.
FWDRE Insight
Never sign an LOI without addressing these five points: (1) Good Guy Guarantee terms, (2) permitted use clause breadth, (3) TI allowance and delivery condition, (4) rent commencement date vs. lease commencement date, and (5) assignment and subletting rights. These are the items that cause the most disputes during lease drafting.
Related Terms
NYC-specific lease provision allowing a tenant to surrender a space and terminate personal liability with proper notice.
A lease provision that defines the specific activities permitted within a commercial space.
A landlord's financial contribution toward a tenant's buildout costs, typically expressed as dollars per square foot.
A lease provision preventing the landlord from leasing to competing businesses in the same building or development.
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