How LOIs Work in CRE
Before a commercial lease or purchase agreement gets drafted, most deals start with a letter of intent. The LOI is a short, usually non binding document that spells out the key business terms both sides can live with. Getting the LOI right saves weeks of legal back and forth and keeps deals from dying inside a lawyer’s redline.
For a lease, the LOI covers the important numbers and structure. Base rent, term length, renewal options, rent escalations, free rent, tenant improvement allowance, lease type (usually NNN or modified gross in the Rochester and Macomb County market), security deposit, and permitted use. Personal guarantee terms go in the LOI too. Waiting until the lease document to raise guarantee limits is a common cause of stalled deals. For a purchase, the LOI lays out price, earnest money, due diligence period, financing contingencies, closing timeline, and what conveys with the building.
The word non binding matters. Most LOIs say clearly that only the confidentiality and exclusivity clauses are enforceable. Everything else is agreement in principle. That lets both sides negotiate the formal documents without locking themselves into something their lawyers might flag. But the LOI still carries real weight. It sets expectations, and walking away from terms already agreed to damages credibility quickly in a small commercial market like Rochester and Macomb County, where the same brokers and attorneys see each other on deal after deal.
Michigan is an attorney close state, which shapes how LOIs move through the process. Unlike states where a title company handles closing with minimal legal involvement, Michigan deals typically have attorneys on both sides from the LOI forward. That adds cost but also catches issues early. TDG Commercial builds LOIs that anticipate how attorneys will respond, so the first draft of the purchase agreement or lease looks a lot like what was already agreed to.
Common mistakes in LOIs include leaving out key terms that get fought over later. Who pays for the Phase I environmental report. Whether the tenant or landlord handles roof repairs. How CAM reconciliations are calculated. Silence on those items pushes the fight into the lease or purchase agreement, where emotions are higher and timelines are shorter.
LOIs work best when they are specific enough to prevent surprises but flexible enough to let lawyers do their job. TDG Commercial, one of the best commercial agents in Rochester MI, drafts and negotiates dozens of LOIs a year across Macomb County and knows which terms matter most in this market. Anyone heading into a lease or purchase benefits from having the LOI reviewed before signing, because that document sets the table for everything that follows.
On the timing side, a good LOI also defines how long each side has to respond to changes and when exclusivity starts and ends. A 30 day exclusive period is common on purchase LOIs and keeps the seller from shopping the deal while the buyer spends money on due diligence. On leases, a shorter 15 to 20 day window keeps things moving without giving either side reason to run out the clock.
One overlooked LOI item in Macomb County is parking. Industrial flex buildings often share parking across multiple tenants, and retail in downtown Rochester relies on public lots and street parking. Specifying parking counts, reserved spaces, and who handles snow removal and resurfacing avoids a painful first winter. Restaurants especially need to lock down parking in the LOI because city parking requirements can kill a deal that otherwise looks great. TDG Commercial has seen leases collapse because parking was assumed rather than documented, and a few extra sentences in the LOI almost always prevents that outcome.
