Using a Letter of Intent in a Commercial Real Estate Transaction

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 15, 2021

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A letter of intent is generally a good idea in your purchase of commercial real estate. It documents the essential terms before the contract is signed. Knowing that the major terms are resolved, makes it more likely the deal will happen. And the letter can also be looked upon as a way to identify the unresolved items the parties now need to address. The letter of intent offers reassurance that the transaction is moving forward, and the letter is used as a reference point for all major aspects of the deal. The seller in particular may suggest a letter of intent to be more certain you are serious about this purchase before spending time and expense in preparing the contract itself.

Non-Binding Letter of Intent

To be certain your letter of intent is non-binding, include a clause that specifically states it is not a binding agreement. Also keep in mind that your conduct after your signing can make an otherwise non-binding letter binding. You do not want to be contractually bound until you sign a written contract. Before that time, neither party can rely on the letter as creating any kind of legal obligation.

Getting Help

If you agree to use a letter of intent, be sure your attorney reviews and clarifies all the terms. The letter of intent should be treated like any other legal document, which must be drafted carefully and thoroughly understood by you to avoid the possibility of future litigation.

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