Call Today! 256-270-9466
Call Today! 256-270-9466
Originally published: February 2026
A Commercial Lease LOI (letter of intent) is a short, written term sheet that documents the terms of a commercial lease before attorneys draft the final lease.
A strong LOI locks the terms that change total occupancy cost, timeline risk, and operational control, then defers detailed legal drafting to the lease.
Most LOIs remain non-binding, except for clauses expressly stated, such as confidentiality, exclusivity, and expense reimbursement.
A Commercial Lease LOI is a written outline of proposed business terms between a landlord and a tenant.
A Commercial Lease LOI reduces re-trading during lease drafting by aligning both parties on economics, timing, and responsibility allocation.
A Commercial Lease LOI should state non-binding intent in a dedicated clause and should identify any binding carve-outs in plain language.
| Include in LOI | Leave for Lease Agreement |
| Rent structure and escalation method | Full legal remedies and default mechanics |
| Lease term and commencement triggers | Detailed default provisions and dispute procedures |
| TI allowance or turnkey scope summary | Technical construction specifications and exhibits |
| Major rights and options | Boilerplate definitions and operational procedures |
A tenant can compare proposals more quickly when the LOI remains clean. A landlord can draft a lease more quickly when the LOI clearly defines the economics.
| Feature | LOI | Lease |
| Purpose | Confirms basic deal terms | Creates a binding rental contract |
| Legal status | Often non-binding except for stated carve-outs | Legally enforceable |
| Detail level | High-level economics and control points | Full legal and operational terms |
| Negotiation stage | Early stage | Final stage |
A tenant should treat the LOI as the decision document. The lease becomes the enforceable implementation.
The process overview for leasing commercial space helps tenants avoid signing an LOI that quietly commits them to a lease form without review rights.
Dean Commercial Real Estate can review your LOI terms and flag cost drivers before lease drafting starts. Get tenant-side or landlord-side support. Schedule an appointment.
A commercial lease LOI should capture the terms that drive total occupancy cost, timeline risk, and operational control.
A commercial lease LOI should state numbers, dates, triggers, and decision rules so the lease draft cannot rewrite the deal.
A commercial lease LOI should state base rent as $/RSF and as a monthly total. A commercial lease LOI should identify the rent type as Gross, Modified Gross, or Triple Net (NNN).
A commercial lease LOI should specify the escalation method and the first escalation date. A commercial lease LOI should define the rent commencement trigger and should separate lease commencement from the rent commencement when the buildout affects timing.
A commercial lease LOI should list concessions and should define the security deposit amount and form.
Include these items in the money section
A tenant should verify the mechanics of the expense before accepting a headline rent. The breakdown of NNN, modified gross, and full-service office leases in Alabama helps tenants map rent types to real cash flow.
A commercial lease LOI should state the operating expense structure as NNN pass-through or base-year accounting.
A commercial lease LOI should define the concept of a controllable expense cap when expense volatility creates risk.
A commercial lease LOI should request audit rights concept and should reserve detailed definitions for the lease.
LOI-level CAM and expense clarity
A tenant should treat the CAM definition as a cost driver, not as a footnote. The CAM fundamentals for CAM charges are the same as those explained in the CAM charges section.
A commercial lease LOI should identify the premises with the building name, street address, suite number, and floor. A commercial lease LOI should state RSF and USF when available, and whether the tenant has remeasurement rights.
A commercial lease LOI should define permitted use as a specific business activity and request exclusives when competitive protection is at issue.
A commercial lease LOI should state parking allocation, access hours, after-hours HVAC responsibility, and any signage rights.
Use clause precision
A commercial lease LOI should state the lease term in months and should define the commencement trigger. A commercial lease LOI should summarize renewal options, including the number of options, option length, notice deadlines, and rent-setting method.
A commercial lease LOI should summarize expansion rights by identifying the expansion area and exercise window.
A commercial lease LOI should outline early termination rights when business risk requires flexibility, including notice, fee, and concession repayment concepts.
Typical control rights to capture
A strong LOI should not duplicate the lease. A strong LOI should reserve detailed legal drafting for counsel and should avoid importing boilerplate that creates conflicting language.
A commercial lease LOI should avoid full indemnity language, detailed default remedies, and insurance endorsements.
A commercial lease LOI can reference “customary commercial terms” at a high level, then delegate the specifics to lease drafting.
Defer these to the lease.
A commercial lease LOI should avoid vague terms that invite later reinterpretation. A commercial lease LOI should define the decision rule, not just the label.
A commercial lease LOI should include a single economics table that captures all cost drivers in a single view.
A single economics table makes landlord proposals comparable and prevents tenants from judging a deal solely on base rent.
| Item | LOI Term |
| Premises size | RSF, plus USF if available |
| Base rent | $/RSF and monthly total |
| Rent type | Gross, Modified Gross, or NNN |
| Escalations | Method and schedule |
| CAM or operating expenses | Structure and estimate basis |
| Taxes and insurance | Pass-through method if applicable |
| Free rent | Duration and start trigger |
| TI allowance or turnkey | Dollars, scope, and timing |
| Security deposit | Amount and timing |
| Term | Months or years |
| Commencement | Trigger definition |
| Options | Renewal and expansion summary |
An LOI sets leverage and expectations for the entire deal. A tenant should first negotiate the cost structure, then the lease protections. A landlord should insist on clarity in exchange for speed and seriousness.
A tenant should push first on terms that affect long-term costs. A tenant should prioritize the expense structure, TI economics, and escalation method.
A tenant should use objective constraints, such as the buildout timeline and relocation costs, to justify concessions.
Priority sequence
The negotiation workflow in negotiating a commercial lease agreement in Alabama aligns with this sequencing.
A landlord should support “standard” terms with market context. A tenant should request comparable deals by asset type and submarket. A tenant should verify the effective rent after concessions, not just the face rent.
Verify these items
Some deals require tighter LOI language because late-stage surprises can result in real business losses.
A commercial lease LOI should specify TI as either $/RSF or a lump sum and define the reimbursement timing.
A commercial lease LOI should define the delivery conditions and should name the plan approval process. A commercial lease LOI should assign permit responsibility and should allocate delay risk.
Delivery condition language that avoids disputes
A commercial lease LOI should state a consent standard for assignment and sublease and define the recapture concept if the landlord requires it.
A shopping center LOI should address co-tenancy when anchors drive revenue. A landlord relocation right should include tenant protections and cost coverage.
A tenant can reduce drafting friction by engaging tenant representation early. A tenant can see how representation supports LOI execution in commercial lease representation and in tenant representation in Huntsville.
A commercial lease LOI should not contain accidental binding language. A commercial lease LOI should not omit the non-binding clause.
A commercial lease LOI should not use undefined economic labels.
A tenant can reduce risk by following the process outlined in “How to Lease Commercial Space” before signing anything.
Negotiate from a position of leverage and avoid lease drift. Start with an LOI, then align lease drafting with your goals through Dean Commercial Real Estate. Contact us.
A commercial lease LOI is a short, written outline of proposed business terms for a lease, used before attorneys draft the final agreement. A commercial lease LOI aligns rent, term, expenses, and key rights early to reduce misunderstandings.
Most commercial lease LOIs are non-binding, but specific clauses may be binding if clearly stated. Common binding carve-outs include confidentiality, exclusivity, access, or expense reimbursement. Enforceability depends on the wording and the jurisdiction.
A commercial lease LOI should identify the landlord and tenant, describe the premises, state the rent and rent type, define the lease term, list renewal options, and set major conditions. Many LOIs also address permitted use and guaranty concepts when relevant.
A commercial lease LOI should avoid a full-lease-style legal drafting approach. Detailed default remedies, indemnity language, insurance schedules, and technical exhibits belong in the lease. The LOI should stay focused on business terms that drive cost and control.
A commercial lease LOI should state the operating expense structure, such as gross, modified gross, or NNN, and should note any expense estimates or cap concepts. Clear expense framing prevents “cheap rent” deals from becoming expensive through pass-through charges.
A commercial lease LOI should define TI as an allowance amount or a turnkey scope, and should state who controls the work and timing at a high level. The LOI should capture dollar amounts, scope intent, and delivery conditions, and leave construction details to the lease.
Either party can draft the LOI, but tenants often benefit from broker or attorney input to ensure that the business terms reflect actual costs and operational needs. Landlords may provide an initial LOI template, then the tenant counters with revisions.
A commercial lease LOI should be short enough to remain negotiable but specific enough to prevent later retrading. Many effective LOIs fit on one to a few pages and use tables or bullets to cover economics, timing, and key rights.
