What Should Be in a Commercial Real Estate LOI -- Every Term TDG Commercial Includes

What Should Be in a Commercial Real Estate LOI -- Every Term TDG Commercial Includes

A letter of intent is the first formal document in a commercial real estate transaction -- and the terms it contains set the tone for everything that follows. A well-structured LOI protects the buyer's position, gives the seller clarity about what they're agreeing to engage on, and creates a framework that makes the path to a purchase agreement smoother.

TDG Commercial in Macomb County, MI is frequently asked by clients which LOI terms to focus on first. Their answer is thorough: all of them. Here's a breakdown of every key term they include and why each one matters.

Purchase Price and Earnest Money

The purchase price is the anchor of the LOI -- and how it's presented sets the tone of the negotiation. TDG Commercial structures the purchase price in a way that reflects the current market and leaves room for the due diligence findings to inform the final number.

Earnest money terms are equally important and often under-specified in weaker LOIs. TDG Commercial addresses the amount, the due date, and critically -- the refundability conditions. Whether the earnest money is fully refundable during the due diligence period, hard at signing, or hard after a specific milestone directly affects the buyer's risk exposure and leverage.

Due Diligence Period

The due diligence period is where buyers protect themselves -- and the LOI needs to spell out exactly what that period looks like. TDG Commercial includes the length of the period, what access rights the buyer has to the property and its records, what deliverables the seller is required to provide, and the buyer's termination rights if the due diligence findings are unsatisfactory.

A vague due diligence provision is one of the most common sources of deal friction. Getting it specific in the LOI saves significant headaches during the due diligence process itself.

Financing Terms, Closing Date, and Extensions

The LOI identifies the loan type the buyer intends to use and any relevant financing conditions. Sellers want to understand how the buyer is financing the acquisition -- and clearly stated financing terms reduce uncertainty on both sides.

The closing date gets established in the LOI, along with any extension provisions for environmental surveys, title review, or other contingencies that may require additional time. Building extension rights into the LOI upfront is much easier than trying to negotiate them after you're already in contract.

Lease and Tenant Items

For investment properties with existing tenants, the LOI should address the tenant-related items that will need to be resolved before closing. TDG Commercial includes provisions for rent roll delivery, tenant estoppels, SNDAs (Subordination, Non-Disturbance, and Attornment agreements), and assignment of any contracts or service agreements to the new owner.

Title, Survey, Prorations, and Representations

Title and survey objection rights establish the buyer's ability to raise issues identified in the title commitment and survey during the due diligence period. Prorations address how ongoing expenses -- taxes, rent, deposits -- will be allocated between buyer and seller at closing. Representations and warranties define what the seller is asserting to be true about the property and the transaction.

Confidentiality and Exclusivity

Depending on the deal, TDG Commercial may include confidentiality provisions to protect sensitive information shared during due diligence, and exclusivity provisions to prevent the seller from continuing to market the property or negotiate with other buyers during the LOI period. Both are deal-specific but worth including when the circumstances warrant.

TDG Commercial Structures LOIs That Protect Buyers and Move Deals Forward

A complete, well-structured LOI isn't complicated -- but it does require knowing what to include and why. TDG Commercial brings that knowledge to every commercial transaction in Macomb County and Rochester, MI, making sure buyers enter the purchase agreement process from a position of clarity and strength.

If you're preparing to submit an LOI on a commercial property, TDG Commercial is ready to help you get the terms right from the start.

📲 Ready to structure an LOI on a commercial property? Reach out to TDG Commercial today.