A commercial letter of intent, often called an LOI, summarizes proposed business terms before the parties negotiate final lease or purchase documents. It can shape rent or price, delivery, buildout, diligence, approvals, timing, risk allocation and future flexibility.
An LOI should not be treated as a casual email or a do-it-yourself legal form. The client should use it to make priorities and tradeoffs explicit, help 7 Streams Commercial Group negotiate the real estate strategy, and give qualified Texas counsel a clear foundation for legal review and definitive documents.
Download the 7 Streams Commercial Letter of Intent Template with Explanations as a client conversation worksheet. Do not sign or send it without appropriate transaction-specific review.
What an LOI should accomplish for the client
A strong LOI process should:
- Identify the correct parties and property
- State the proposed economics in understandable units
- Describe delivery, work and timing with measurable triggers
- Address rights the business needs to operate
- Surface approval, diligence and financing conditions
- Separate resolved terms from open issues
- Identify which provisions may be binding or non-binding
- Create a useful roadmap for counsel and final documents
The goal is not to draft every legal clause at the LOI stage. It is to prevent a material business issue from being hidden behind shorthand or postponed until leverage has changed.
Define priorities before negotiating
Before responding to a proposal, prepare three lists:
Must have
Terms without which the site or transaction does not support the business plan. Examples may include use, parking, approval rights, delivery condition, utility capacity, access, diligence or financing protection.
Tradeable
Terms where the client can exchange one form of value for another. For example, a lower allowance might be acceptable with more free rent, or a longer term might be acceptable with stronger renewal or assignment rights.
Walk-away
Conditions that create unacceptable cost, schedule, personal exposure or operating restriction.
Share these priorities with 7 Streams. A clear hierarchy allows the negotiation to focus on the client’s real objectives rather than treating every clause as equally important.
Understand binding and non-binding treatment
Calling a document an LOI or labeling it non-binding does not by itself answer every legal question. Language, context, signatures and conduct can matter. Some LOIs include provisions intended to bind immediately, such as confidentiality, exclusivity, access or expense allocation.
Ask Texas counsel to address:
- Which provisions are intended to be binding?
- How long do they last?
- What obligations and remedies apply?
- Can either party stop negotiations?
- Does signature indicate agreement, discussion or approval to draft?
- Are incomplete exhibits or open terms clearly identified?
The Texas Real Estate Commission states that it does not promulgate forms for commercial property. Commercial LOIs and definitive documents should receive appropriate Texas legal review.
Commercial lease LOI terms clients should understand
Parties, premises and measurement
Use full legal names and identify the premises with a plan. State the approximate rentable area and measurement method. If remeasurement could change rent or allowance, discuss a cap or adjustment process.
Permitted use
Describe the real operation, including reasonable ancillary activities. Consider pickup, delivery, patio, signage, storage, medical services, food, training, retail sales, alcohol or other relevant functions. The use should align with zoning, licensing, restrictions and the business plan.
Term and options
Define the initial term, commencement trigger and renewal options. Avoid using “market rent” without discussing the determination process, timing, floor, cap and dispute procedure.
Delivery date and delivery condition
Separate target delivery from an outside date. Describe required landlord work and the condition of roof, HVAC, utilities, fire and life safety, restrooms, access and other critical systems. Identify evidence, inspection, cure and delay remedies.
Base rent and additional rent
State rent in both rate and monthly dollars when practical, including escalation. For operating expenses, discuss categories, current estimate, exclusions, caps, gross-up, reconciliation and audit rights. “Standard NNN” does not define the client’s cost.
Tenant-improvement allowance
Address amount, area basis, disbursement, deadlines, eligible cost, documentation, lien waivers, unused funds, landlord delay and any repayment obligation.
Free rent, fixturing and early access
Distinguish construction access, opening, rent commencement and term commencement. Confirm whether operating expenses, utilities and insurance apply during free-rent periods.
Landlord and tenant work
Use plans or a work letter. Identify who performs and pays for each item, the standard, deadline, approval process and consequence of failure. The word turnkey is not a scope.
Parking, access and signage
State quantity, location, reserved or shared status, cost, hours and enforcement. Identify building, monument, directional, window and other sign rights. Attach locations when they matter.
Exclusive use and prohibited uses
Define the protected business category, geographic area, existing exceptions and remedy. Broad language without a workable definition or remedy may not protect the business.
Assignment and subletting
Consider affiliates, successors, franchise transfers, ownership changes, financing, business sale and ordinary sublease needs. A growing or changing company should not accept a transfer clause that ignores realistic events.
Guaranty and security
Understand deposit, letter-of-credit and guaranty exposure. Discuss objective burn-off, reduction or release conditions rather than relying on a future discretionary conversation.
Regulatory and opening conditions
If the business depends on zoning, building, food, medical, sign, alcohol, utility or other approvals, discuss a contingency with a defined deadline, access and cooperation. The client should understand what happens if approval cannot be obtained despite diligent pursuit.
Casualty, condemnation and interruption
Discuss rent relief and termination rights if damage, access loss or restoration timing materially impairs the operation.
Commercial purchase LOI terms clients should understand
Property and included assets
Define land, improvements, easements, leases, deposits, contracts, plans, warranties and personal property. Identify exclusions.
Price and earnest money
State the purchase price, deposit amount, timing, escrow holder, refundability and when funds become nonrefundable. Ask counsel to address independent consideration and release mechanics.
Feasibility period
Define the length, trigger and access rights. Consider whether the period begins only after the buyer receives a usable minimum document set. Address testing, restoration and seller cooperation.
Seller deliveries
List title, survey, leases, income and expenses, taxes, contracts, environmental reports, plans, permits, notices, litigation and other property-specific information.
Title, survey and environmental review
Identify who orders and pays, objection and cure timing, permitted exceptions and access for environmental and physical work. Do not allow the schedule to expire before underlying exception documents and reports can be reviewed.
Financing
State whether the proposal includes a financing condition. Do not assume protection exists if it is not addressed.
Representations and interim operations
Identify topics for the definitive agreement, including authority, leases, contracts, violations, litigation, environmental matters and ordinary-course operation. Details such as knowledge standards, survival, caps and remedies belong with counsel.
Estoppels, SNDAs and tenant matters
For occupied property, define required estoppel thresholds, key tenants, acceptable deviations and lender needs.
Closing, costs and prorations
State target timing, title or escrow, possession, leaseback, allocation of title, survey, escrow, recording and other costs, plus the method for prorating rent, taxes, CAM and utilities.
Avoid vague LOI shorthand
The following words often hide unresolved business questions:
- Market rent: What properties, process, floor, cap, timing and dispute method apply?
- Turnkey: Which plans, materials, systems, approvals and acceptance standards are included?
- Standard NNN: Which expense categories, exclusions, caps, gross-up and audit rights apply?
- As is: Which known work, system condition, code, access or delivery responsibilities remain?
- TBD: Who decides, by when, within what range and what happens if there is no agreement?
- Reasonable: Who determines reasonableness, within what response time and with what remedy?
If the issue can materially affect economics, operation, schedule or risk, define it or mark it as an open decision.
Use the LOI to improve adviser conversations
For each material term, the client worksheet should record:
- Preferred position
- Minimum acceptable position
- Reason the term matters
- Supporting property or market fact
- Fallback tradeoff
- Question for 7 Streams
- Question for counsel or another adviser
- Decision deadline
This keeps the real estate negotiation and legal drafting connected without asking either adviser to work outside the appropriate scope.
Common LOI mistakes
- Signing before the correct entity and authority are confirmed
- Leaving the premises plan or property exhibit incomplete
- Negotiating face rent while ignoring total occupancy cost
- Accepting delivery language without measurable condition
- Treating access, parking or signage as implied
- Postponing use and approval risk until the final lease
- Using a non-binding label without legal review
- Allowing verbal side agreements to remain outside the document
- Using an expiration time to pressure a decision before advisers can review
- Failing to record open issues for definitive documents
Frequently asked questions
Is a commercial LOI legally binding in Texas?
It depends on the language, context and conduct. Some provisions may be intended to bind even when the main transaction terms are non-binding. Ask qualified Texas counsel to review the specific document.
Should a tenant send an LOI without an attorney?
7 Streams can help develop and negotiate business strategy, but legal effect and drafting should receive appropriate counsel review before the client signs or sends the document.
Does an LOI guarantee the lease or purchase will happen?
Usually the transaction remains subject to definitive documents and stated conditions, but the specific LOI controls. Read the intent language and binding sections carefully.
How detailed should an LOI be?
Detailed enough to resolve material business terms and expose important open issues. It does not need to reproduce the final contract, but vague language should not hide a major economic or operating assumption.
Can the LOI be changed later?
Parties can negotiate changes, but leverage, timing and expectations may shift. It is usually better to address major business issues before definitive drafting.
Who should write the LOI?
The right process depends on the transaction. The client should set priorities, 7 Streams should help with real estate strategy and negotiation, and counsel should address legal drafting and effect.
Download the client LOI worksheet
Use the 7 Streams Commercial Letter of Intent Template with Explanations to organize priorities, recognize common terms and prepare focused conversations with 7 Streams and Texas counsel.
Visit www.7s.life, email info@7s.life, or call 512-655-3754 to discuss a Texas commercial lease or acquisition.
Supporting blog cluster suggestions
- Commercial Lease LOI Terms Tenants Should Understand
- What Does Turnkey Mean in a Commercial Lease Proposal?
- NNN Lease LOI Questions Beyond Asking Rent
- Tenant Improvement Allowance Terms to Discuss in an LOI
- Commercial Lease Guaranty and Burn-Off Questions
- Purchase LOI Feasibility Period and Seller Deliveries
- Is a Commercial LOI Binding in Texas?
- Parking, Signage and Permitted Use in a Commercial LOI
- How to Prepare a Commercial LOI Negotiation Brief
- Lease Delivery Date vs. Rent Commencement
Official sources
- Texas Real Estate Commission, Contracts: https://www.trec.texas.gov/agency-information/contracts
- Texas Property Code, Chapter 5, Conveyances: https://statutes.capitol.texas.gov/Docs/PR/htm/PR.5.htm
- Texas Property Code, Chapter 12, Recording of Instruments: https://statutes.capitol.texas.gov/Docs/PR/htm/PR.12.htm
Sources reviewed July 22, 2026. This is educational content, not a promulgated form or legal advice. Obtain transaction-specific Texas counsel review.