A letter of intent, or LOI, is a short document that sets out the main terms of a commercial real estate deal before the lawyers draft a full purchase contract or lease. It lets the buyer and seller, or the tenant and landlord, agree on the business points first. In Sarasota, most commercial sales and many leases start with an LOI.
Why Parties Use an LOI
Drafting a full contract takes time and legal fees. An LOI confirms that both sides agree on price and key terms before anyone spends that money. It also gives a seller a clear way to compare offers from several buyers.
What a Purchase LOI Usually Includes
Price and deposit: the purchase price and the earnest money amount
Due diligence period: how long the buyer has to inspect the property, often 30 to 60 days
Financing: whether the deal depends on the buyer getting a loan
Closing date: when the sale is expected to close
Contingencies: conditions such as inspections, zoning, or appraisal
Closing costs: who pays for title insurance, documentary stamp taxes, and other fees
Exclusivity: whether the seller will stop marketing the property while the contract is drafted
What a Lease LOI Usually Includes
Premises, size, and how the space is measured
Lease term and renewal options
Base rent, yearly increases, and free-rent periods
Lease type, such as NNN or gross
Tenant improvement allowance and who builds out the space
Permitted use, signage, and parking
Security deposit or personal guarantee
Binding vs Non-Binding Terms
Most LOIs are non-binding on the deal itself. Either side can walk away until a contract or lease is signed. A few clauses are often written to be binding, though, and those deserve a careful read.
Term | Usually binding? |
|---|---|
Price and deal terms | No |
Confidentiality | Yes |
Exclusivity or no-shop period | Often yes |
Access for inspections | Sometimes |
Who pays each side’s costs | Often yes |
How Long the Process Takes
Here is an illustrative timeline for a typical Sarasota commercial sale, from LOI to closing. Every deal is different.
Stage | Typical time | Chart |
|---|---|---|
Negotiate the LOI | 1 to 2 weeks | ██ |
Draft and sign the contract | 2 to 3 weeks | ███ |
Due diligence | 30 to 60 days | ███████ |
Financing and closing | 30 to 45 days | ██████ |
Tips for Sellers Reviewing an LOI
Look past the price. A slightly lower offer with a short due diligence period and no financing contingency can be the stronger offer.
Check the deposit. A larger deposit that becomes non-refundable sooner shows a committed buyer.
Limit exclusivity. Keep any no-shop period short and tied to signing a contract.
Ask about the buyer’s plans. Rezoning or redevelopment plans can add time and risk.
Plan for taxes. If you are exchanging into another property, note it in the LOI. See the 1031 exchange guide.
Frequently Asked Questions
Is a letter of intent legally binding?
Usually not for the main deal terms, but some clauses, such as confidentiality and exclusivity, are often binding. The wording matters, so it is wise to have an attorney review an LOI before you sign it.
Can I back out after signing an LOI?
In most cases, yes, as long as the LOI is non-binding and you have not breached a binding clause. Once a purchase contract is signed, backing out becomes much harder and may cost you your deposit.
Who writes the LOI?
The buyer or tenant usually prepares the first draft, often with help from their broker. The other side responds with changes until both agree on the terms.
If you are buying or leasing commercial space and want a strong LOI, work with a buyer’s representative or call Eric Barnes at 941-207-9707.
For property owners
Work with a buyer’s representative
About the author: Eric Barnes
Eric Barnes | Commercial Advisor | 941-207-9707
Michael Saunders & Company | MSC Commercial | Sarasota, Florida
Florida License SL3600406 | GRI | RSPS
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