Lease legalese: submitting an LOI and RFP
A lot of time and effort goes into working on a Landlord’s Request for Proposal (RFP) or negotiating a Letter of Intent (LOI) and it’s important to understand what you as a tenant of commercial property are agreeing to.
Even though these are non-binding documents, they set a key precedent that the lawyers look to when drafting the lease document.
Here are a few areas to make sure you consider during the RFP and LOI process:
It’s important for a Tenant to specify exactly what options it has going forward (i.e., renewal options, preferential rights to lease, contraction options, rights of first refusal, rights of first offer, etc.).
Be as specific as possible on deal points so there is no confusion later—what floors are subject to those options, what other tenants have superior rights to you, what is the rent of any new space you take, and beyond.
Operating Expenses and Exclusions
always ask for the Landlord’s standard list of Operating Expenses and exclusions, so you can begin to negotiate what is included and excluded up front, and so you know what you’re paying for. Also ask for the last few year’s actual amounts so you know what you’re getting yourself into, even though those numbers won’t actually be in the lease.
Tenant Improvement Allowance
In addition to the amount, specify exactly when and how the Tenant Improvement Allowance will be paid, and what the allowance can be applied towards.
Depending on your size, you may be able to negotiate for various rights for interior and exterior signage, in addition to space on the Building’s directory board. Be specific as to what rights you have as a tenant, what other tenants have such rights and where the signs can be located.
Obviously these are just four of many lease points which often get negotiated through the RFP and LOI process, and that’s why it is important for tenants, even small ones, to have qualified brokers and lawyers represent them from the beginning. What are some of the biggest issues you see when working on an RFP or LOI?