You’ve spent hours upon hours researching property listings. You’ve spent untold weekends looking at spaces. Finally, you’ve found the perfect place to rent for your business. Congratulations! At this point, you may be tempted to dive right in. But before you take the first official step toward setting up shop — signing a letter of intent (LOI) with your new landlord – there are a few important things to consider.
A letter of intent is a precursor to a fully negotiated lease, and lays out the parties general expectations about the terms of the lease. It is, in short, an agreement to make an agreement. The law continues to be unclear whether the LOI is binding, but parties that do not take them seriously are making a big mistake. Because there is this legal uncertainty, there is a chance that the LOI will be determined enforceable.
Therefore, be careful what you agree to! Even the strongest positioned or leveraged parties have trouble renegotiating terms of a lease once agreed upon in the LOI.
Hopefully, you have a broker working with you to look out for you, but even when you do, make sure there is not a dual representation of the lessee and the lessor, or landlord. If there is dual representation, keep it in mind as you move through the stages and remember that the broker is representing both parties. This can create a conflict at times, and the lessee should keep in mind that the lessor is likely a repeat client of the broker. For that reason, the broker — consciously or not — may be inclined to represent the lessor’s rights more vigorously than the lessee’s.
Items to consider as you enter into a letter of intent:
These are just some of the issues that may arise in the letter of intent stage of a lease negotiation, and of which the tenant should be aware. If they are addressed and agreed upon at this stage, keep in mind that it will be difficult to renegotiate these terms later. It is important to work with someone who is working for you, and can preserve your rights on these issues. If you have questions about a lease letter of intent or about lease negotiation for your business in general, please contact me.
You may also be interested in our video on the importance of the lease letter of intent in lease negotiations.
There are 10 things your attorney should be doing to help you succeed. If yours isn’t doing them, it may be time for a new attorney.
Download the Free Guide NowFor blogs, videos and additional information to help your business thrive in Detroit or elsewhere in Michigan, visit the Dalton & Tomich, PLC business resources page.
Having worked with Zana for 10 years, I can attest to her professionalism, her pragmatism, and most importantly, her integrity. I always get sound, thoughtful advice and guidance. From routine filings & updates to the highly unexpected, Zana’s there to help, always responding quickly and […]
Read MoreWe highly recommend Dalton & Tomich! As a start-up firm that has rapidly grown across the country in under 5 years, Dalton & Tomich has been integral to our sound, credible, and excellent in standard infrastructure. As we’ve scaled, Zana has been right by our […]
Read MoreAs a professional photographer in the wedding industry, reliable communication is very important to me. Noel was very knowledgeable and quick to respond to all of my questions and not just that, he also gave me suggestions when reviewing and updating my contract. The entire […]
Read MoreZana’s expert guidance has helped us to move forward with clarity and confidence in our business endeavors. She helped us create a new business entity, and a few years later to navigate a tricky buyout—all with a clear path forward for business growth. Her calm […]
Read MoreNoel’s guidance was much appreciated when redrafting my client contract. He was very professional, respectful of my time and potential costs, and was sincere with his advice. I trusted that he had the highest good for my business in mind. I will seek out his […]
Read MoreZana’s expertise in employee law has helped us refine and build a stronger operations and hiring strategy at my company. As a business owner of a small and fast growing company, I very much appreciate Zana’s ability to always step into any situation quickly and […]
Read More