A letter of intent, or LOI for short, is a written statement that describes the intentions of every party that is thinking about entering into a binding contract. Business transactions are the more frequent use of letters of intent than personal legal disputes. They can be applied, therefore, in any circumstance when two people are looking to work together and want to reach a consensus on the major concerns before working out the specifics.
Heads of terms (abbreviated as HoT) are most commonly used when referring to a letter of intent that is written as a skeleton agreement. If aims or justifications are stated, a letter format could be more appropriate. Heads of terms are typically an overview of the terms, arranged in the same chronological order as the points in a final agreement. A complete draft agreement is based on both documents. An agreement based on heads of terms is typically limited to the clarification of certain legal points.
Heads of terms and letters of intent may be used whenever necessary. The document can be drafted before the negotiations are concluded. One side can utilise an early draft of a letter of intent to serve as a reminder of the subjects to be covered. In this article, Negotiating Commercial Lease Letter Of Intent, we take a look at the process and mechanism involved.
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When negotiating letters of intent, what should be included?
- Full details of the parties involved and a comprehensive description of the land including plans.
- Capital sum or rent terms (amount, frequency and term)
- Specific terms pertaining to the land E.g rights of way and access.
- Cost liabilities i.e which party pays for what
- Full details of the solicitors representing both sides
- Details of security of tenure as to whether the lease it is covered by the landlord and tenant act 1954.
- Break clause: explains whether there will be a break in the lease and, if so, what needs to happen before the break takes effect.
- Rent review: when and under what circumstances (e.g., market rent or an increase in accordance with the Retail Price Index) will the rent be reviewed?
- Rent-free period: Before the tenant formally occupies the space for business purposes, the landlord may offer a rent-free term to allow the tenant to furnish the space.
- Rent deposit: If a deposit is required, the amount and timing of its return to the tenant should be specified.
- Services and service charge: In the event that the rental property is a part of a larger building or estate, the landlord may be obligated to provide services to make sure the tenant is able to use the remaining portion of the building or estate. The tenant shall be responsible for covering any costs associated with delivering these services.
- Who is responsible for insuring the property?
- Use: the permitted uses of the property and whether the tenant has the right to alter them.
- Repair: The level of maintenance that the tenant must apply and maintain for the property, which may involve consulting a schedule of conditions.
- Fitting out: If a tenant needs to make changes to the property in order to make it usable, now is the time to decide how big of a change they should make.
How we can help
We have a proven track record of helping clients negotiate commercial lease letters of intent. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
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You need to be well informed about the issues and possible implications of buying, selling or renting commercial property. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Commercial Property solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well-known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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