The lease LOI checklist that gets signed

A no-fluff weekly briefing for people who own, manage, and broker commercial real estate. Written by a guy who does all three.

Investment sales are slow. Leasing isn't. Most lease deals are won or lost in the letter of intent, not at lease signing.

The LOI isn't the lease. It's the filter. The landlord finds out if the tenant is real. The tenant locks the economics before paying for plans, permits, and lawyers.

I represent tenants and landlords, so here's both sides. These are the 24 terms in the LOI I actually use, in the same order. For each one: what it is, what the tenant wants, what the landlord wants. The deal gets signed somewhere in between.

The basics (1–4)

1. Tenant. The exact legal entity signing the lease.

• Tenant wants: To sign in the business entity, not personally.
• Landlord wants: A tenant with real credit, or a guarantor who has it.

2. Initial Term. How long the lease runs, in years and months.

• Tenant wants: A shorter term with options, so it can leave if the business changes.
• Landlord wants: A longer term. It pays back the TI and commissions and makes the building worth more.

3. Options. The tenant's right to renew, and how many times.

• Tenant wants: Several renewal options at a known rent, or a capped bump.
• Landlord wants: Fewer options, at fair market value.

4. Location. The address, suite, and square footage, shown on a site plan.

• Tenant wants: Usable square feet it can verify, and the site plan attached.
• Landlord wants: Rentable square feet (with the common area load) measured to a standard.

Dates, rent, use, deposit (5–9)

5. Lease Commencement. The date the lease starts.

• Tenant wants: Start tied to delivery of the space, ready to go. No delivery, no start.
• Landlord wants: A fixed date that doesn't move.

6. Rent Commencement. The date the tenant starts paying rent. Often not the same as #5.

• Tenant wants: Rent to start after build-out and opening, plus some free months.
• Landlord wants: Rent to start at delivery, with as little free rent as possible.

7. Rent. Base rent, the annual bumps, and option rent.

• Tenant wants: Lower starting rent, small fixed bumps, and option rent capped.
• Landlord wants: Market rent, 3% or more a year, and option rent at fair market value.

8. Use/Exclusive. What the tenant can do in the space, and whether it gets an exclusive.

• Tenant wants: A broad use clause and an exclusive that keeps competitors out of the center.
• Landlord wants: A narrow use, and no exclusives that tie up the rest of the property.

9. Security Deposit. The cash held against default.

• Tenant wants: One month, with any extra burned down after a year or two of on-time rent.
• Landlord wants: First month's rent plus a deposit at signing. More if credit is thin.

Operating costs (10–11)

10. Operating Expenses. Taxes, insurance, and CAM on top of base rent (NNN), and the tenant's share.

• Tenant wants: Real numbers per square foot in writing, a cap on controllable CAM, and no surprise admin fees.
• Landlord wants: Pass through all of it, with a pro rata share based on rentable square feet.

11. Utilities and Services. Who provides water, power, sewer, trash, HVAC, and janitorial, and who pays.

• Tenant wants: Its own meter, so it pays only for what it uses.
• Landlord wants: Everything not separately metered billed back as NNN.

The space: build-out and condition (12–16)

12. Landlord-Provided Improvements. The work the landlord does before handing over the keys. As is, or something more.

• Tenant wants: Landlord's work at landlord's cost, described in a workletter.
• Landlord wants: As is. If not, a short, fixed scope.

13. TI Allowance. Dollars per square foot the landlord pays toward the tenant's build-out.

• Tenant wants: More dollars, paid fast, and the right to put unused money toward rent.
• Landlord wants: Fewer dollars, paid against lien releases, unused money stays with the landlord.

14. Alterations. The tenant's right to change the space during the lease.

• Tenant wants: No consent needed for non-structural work, no supervision fee, and no duty to remove it at the end.
• Landlord wants: Approval of all work, the tenant's contractors insured, and restoration at move-out.

15. Prior Occupancy. Early access to install furniture, fixtures, and equipment before the lease starts.

• Tenant wants: Rent-free early access, as early as possible.
• Landlord wants: Early access only if it doesn't slow down the landlord's work, with insurance in place.

16. Condition of Premises and Common Areas. The shape the space and common areas are in on delivery.

• Tenant wants: Roof watertight, systems working, the space and the path to it up to code (including ADA).
• Landlord wants: As is, with no promises about code or building systems.

Control and risk (17–19)

17. Signage. What signs the tenant can put up, and where.

• Tenant wants: Building, monument, and window signs spelled out in the LOI.
• Landlord wants: "Per the lease" and the sign criteria, with landlord approval.

18. Assignment/Sublease. The tenant's right to hand off or share the space.

• Tenant wants: Consent "not unreasonably withheld," no recapture, free transfers to affiliates or a buyer of the business, and its costs off the top before any profit split.
• Landlord wants: Full control over who's in the building, a recapture right, and a share of any profit.

19. Hazardous Materials. Who's on the hook for contamination.

• Tenant wants: Landlord responsible for anything already there, plus copies of any environmental reports.
• Landlord wants: Tenant responsible for anything it brings in, and a limit on what the landlord promises.

The fine print that matters (20–24)

20. Exclusive Negotiations. A window when neither side shops the deal.

• Tenant wants: Short, or none, until it knows the deal works.
• Landlord wants: An exclusive long enough to get the lease drafted and signed (30 days is common).

21. Confidentiality. Who can see the terms.

• Tenant wants: Terms kept private, so other landlords can't see its deal.
• Landlord wants: Terms kept private, so other tenants can't use them as a comp.

22. Binding Agreement. A statement that the LOI is not a lease, except for the parts both sides agree are binding.

• Tenant wants: Non-binding, so it can walk if the lease doesn't match.
• Landlord wants: Same. Both sides usually make exclusivity, confidentiality, and commission binding.

23. Agency Disclosure. Who represents whom.

• Tenant wants: Its own broker, working only for it.
• Landlord wants: The same. It confirms in writing who the listing broker represents.

24. Brokerage Compensation. Who pays the brokers, how much, and when.

• Tenant wants: Landlord pays the commission, split half at signing, half at occupancy.
• Landlord wants: The amount fixed in writing, ideally paid as rent comes in.

Also decide (not in my template, but they kill deals):

• Guaranty / credit. Who guarantees, the cap, and when it burns off.
• Parking. How many stalls, reserved or not, and the cost.
• Co-tenancy (retail). Rent relief if the anchor or the center goes dark.
• Contraction / early termination. The right to shrink or leave early, and the fee.
• HVAC / after-hours. Who maintains and replaces the HVAC, and the after-hours rate.
• Contingencies. Permits, financing, franchisor or board approval, with drop-dead dates.
• Next step. Who drafts the lease, and by when.

If you only fight for five things in this market: rent and bumps (#7), operating expenses (#10), landlord work and TI (#12–13), security deposit and guaranty (#9), and lease and rent commencement (#5–6).

Bonus: make landlords compete (the RFP letter)

Sometimes the tenant would take any of two or three spaces. Or it just wants the best deal. Then I don't send one LOI. I send a request for proposal (RFP) to several landlords at once and let them compete.

When to use it

• The tenant has two or more spaces that would work.
• There's no must-have building.
• There's time to wait a week or two for answers.

How it's different from a standard LOI

The LOI says, "Here's what we'll pay." The RFP says, "Tell us your best deal." It asks the landlord to fill in:

• Rent for both a 5-year and a 10-year term, plus option rent for each.
• Operating expenses per square foot, the tenant's share, and any base year or expense stop.
• How the space will be delivered (as is, vanilla shell, etc.).
• The TI allowance on top of that delivery condition.
• Who pays the brokers (a commission line).

It keeps a 30-day exclusive once a proposal is accepted, and a workletter exhibit (the landlord's work list) so everyone prices the same scope.

Tips

• Send the same format to every landlord. Same items, same order.
• Set a deadline to respond.
• Compare apples to apples. Put the answers side by side and compare total cost over the term, not just the starting rent.
• Don't share one landlord's numbers with another. Push on terms, not leaked bids.
• Keep the tenant's name confidential until it's needed.

Landlords: when you get one, answer every item. The cleanest, most complete proposal is often the one that gets the call back.

Washington note on commissions (not legal advice): In Washington, a broker with a signed, written commission agreement on commercial property can record a lien on the landlord's base rent from that lease (RCW 60.42). It's a lien on the rent, not on the building. For a lease, it has to be recorded within 90 days after the tenant takes possession. Landlords can ask the broker to waive the lien in the commission agreement. That's why my LOI says the space is commercial real estate under RCW 60.42 and makes the commission part binding. Other states have different rules. Talk to your attorney.

Free download: the fill-in LOI template. The same 24-term LOI I use, cleaned up so you can add your own logo, name, and info. Tenant and landlord choices built in. Exhibits included. Bonus: the RFP version for making landlords compete. Download both templates, in Word or PDF.

Have an attorney review before you send either one.

Next week: Due diligence. The 15 to 20 items I run when I list a property or represent a buyer.

Watch The Build with Robert and see what we're building at creroom.com and on YouTube @TroyMuljat.

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— Troy

Educational content only, not investment or legal advice. Not a solicitation for Muljat Group Commercial or Landmark Real Estate Management.