What Is a Letter of Intent (LOI) and How Binding Is It?

Curated by Kory White · Fractional CRO, CRO Syndicate

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📅 Published Jun 21, 2026 · Updated Jun 21, 2026

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What Is a Letter of Intent (LOI) and How Binding Is It?

Direct Answer

A Letter of Intent (LOI) is a short document — usually 2 to 6 pages — that spells out the major business terms of a lease deal before lawyers draft the full lease: rent, term, TI allowance, free rent, square footage, use, and key clauses. Critically, an LOI is mostly non-binding on the deal terms but selectively binding on a few specific provisions you must control.

The money move: state in plain language that the LOI is "non-binding except for the confidentiality, exclusivity/no-shop, and governing-law provisions" — and make sure the economic terms (rent, TI, free rent) are NOT binding until a full lease is signed.

The danger is the reverse: an LOI drafted by the landlord may try to bind you to economic terms while keeping their delivery and contingency obligations loose. Get it backward and you've locked in a $40/sq ft rent with no protections, or accidentally created a binding contract a court will enforce.

Negotiate hard at the LOI stage — it sets the anchor for everything, and you have maximum leverage before you've spent money.

What an LOI Actually Does

The LOI is the deal blueprint. Whatever you win here, the lease almost always honors; whatever you skip here, you fight uphill to add later. Use it to lock the big numbers and flag your must-have clauses:

Economic terms: base rent ($/sq ft), annual escalations (commonly 2%–3%), lease term (e.g., 5 or 10 years), renewal options, TI allowance ($30–$80+/sq ft), and free rent / buildout period (60–120 days).
Space terms: rentable vs. Usable square footage, load factor, delivery condition, parking.
Key clauses to flag now: co-tenancy, exclusive-use, relocation (delete it), HVAC responsibility, assignment/sublease, and a kick-out/termination right.

If a clause matters to you, name it in the LOI. Silence here is how landlords win the lease draft later.

How Binding Is It, Really?

The honest answer: it depends on the words used and how the parties behave — which is exactly why precision matters. Three rules:

Say it's non-binding — explicitly. Include a clear statement: *"This LOI is a non-binding expression of interest and creates no obligation to lease except for the binding provisions identified below. No party is bound unless and until a definitive lease is fully executed."* Without this, courts in some states can find an enforceable agreement from an LOI plus conduct (deposits paid, possession taken, "agreement to agree" treated as a deal).
Make a few provisions binding — on purpose. You usually *want* these to bind: confidentiality, exclusivity / no-shop (landlord can't shop your deal to other tenants for 30–60 days), governing law, and sometimes good-faith negotiation.
Keep the economics non-binding. Rent, TI, term, and contingencies should bind only in the signed lease, so you retain the right to walk if due diligence turns up problems.

The classic trap: an LOI that is silent on bindingness, includes a deposit, and uses committed language ("Tenant shall lease...") can be argued into a binding contract. Avoid ambiguity.

The Binding-vs-Non-Binding Split

Here's the split a tenant-favorable LOI should draw:

NON-binding (deal can still die): base rent, escalations, term, TI allowance, free rent, square footage, delivery condition, all contingencies. These bind only at lease signing.
BINDING (enforceable from signature): confidentiality, exclusivity / no-shop period, governing law, and a clear statement that nothing else binds without a signed lease.
REFUNDABLE: any good-faith deposit held during LOI negotiation must be fully refundable if the deal doesn't close. Never put non-refundable money down at the LOI stage.

Drawing this line protects you both ways: the landlord can't enforce the economics against you, but you *can* enforce the no-shop so they don't auction your deal to a competitor.

Negotiate Hard Here — Leverage Peaks Early

The LOI stage is where you have the most leverage and the least sunk cost. Use it:

Anchor every number you care about. First numbers stick. If you want $35/sq ft and $60/sq ft TI, put it in the LOI; you'll rarely improve it later.
Win the no-shop. A 30-to-60-day exclusivity stops the landlord from playing you against other tenants while you spend money on due diligence.
Flag clauses you'll demand in the lease. Name relocation deletion, co-tenancy, exclusive-use, HVAC caps, and kick-out rights so they're not a surprise in the draft.
Keep deposits refundable and small. A good-faith deposit is fine; a non-refundable one at LOI is a red flag.
Set the outside dates. Target dates for lease execution, delivery, and rent commencement so the deal has momentum and accountability.

A strong tenant-rep broker runs the LOI for free to you (the landlord pays commission) and routinely turns a landlord's one-sided LOI into a tenant-protective one before a single lawyer dollar is spent.

flowchart TD A[LOI drafted] --> B{Bindingness stated?} B -->|No| C[DANGER - court may enforce as contract] B -->|Yes| D[Non-binding except named provisions] D --> E[Binding: confidentiality + no-shop + governing law] D --> F[Non-binding: rent, TI, term, contingencies] E --> G[Sign LOI] F --> G G --> H[Due diligence + lease draft] H --> I{Lease fully executed?} I -->|Yes| J[Economic terms now binding] I -->|No| K[Walk away - refundable deposit returned]

flowchart LR A[LOI terms] --> B[Economic: rent/TI/term/free rent] A --> C[Procedural: confidentiality/no-shop/law] B --> D[NON-binding until lease signed] C --> E[BINDING from signature] D --> F[Tenant keeps right to walk] E --> G[Landlord can't shop the deal]

Mistakes That Turn an LOI Into a Trap

Leaving bindingness silent. Always state it explicitly. Ambiguity is how a non-deal becomes an enforceable one.
Letting economics bind early. Rent, TI, and contingencies should bind only at lease signing, never in the LOI.
Skipping the no-shop. Without exclusivity, the landlord shops your terms to drive a competing bid while you do due diligence.
Non-refundable deposits. Never. Keep good-faith money fully refundable until the lease closes.
Not flagging key clauses. If you don't name relocation deletion, co-tenancy, exclusive-use, HVAC caps, the lease draft will omit your protections and you'll fight to add them.

Brokers at CBRE, JLL, and Cushman & Wakefield all treat the LOI as the single highest-leverage moment in a lease deal — the place where the economics are won or lost before legal fees ever start.

FAQ

Is a Letter of Intent legally binding? Mostly non-binding on the deal terms, but it can bind a few specific provisions (confidentiality, exclusivity/no-shop, governing law) and — dangerously — can be construed as an enforceable contract if it's silent on bindingness and the parties act like a deal exists.

Always state explicitly that the LOI is non-binding except for named provisions.

Which parts of an LOI should be binding? You generally want confidentiality, the exclusivity / no-shop period (30–60 days), and governing law to bind. Keep all economic terms (rent, TI, term, free rent) and contingencies non-binding until the full lease is signed, so you retain the right to walk after due diligence.

Can a landlord back out after signing an LOI? Yes, on the non-binding economic terms — that's the point of an LOI. But they're bound by any binding provisions like the no-shop. That's why winning the exclusivity clause matters: it stops the landlord from shopping your deal while you spend on due diligence.

Should I put a deposit down at the LOI stage? A small good-faith deposit is sometimes requested, but it must be fully refundable if the deal doesn't close. Never agree to a non-refundable deposit at the LOI stage — that's a trap that puts your money at risk before any protections are in place.

Sources

CBRE — Tenant advisory on letters of intent and lease deal-term negotiation.
JLL — Tenant representation guidance on binding vs. Non-binding LOI provisions and exclusivity.
Cushman & Wakefield — Leasing advisory on LOI structure and economic-term anchoring.
NAIOP (Commercial Real Estate Development Association) — Commercial lease negotiation resources, including LOI best practices.
BOMA International — Standard lease process commentary on letters of intent.
IREM (Institute of Real Estate Management) — Property management standards on lease documentation.
American Bar Association — Real Property section commentary on enforceability of letters of intent and "agreements to agree."

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<svg xmlns="http://www.w3.org/2000/svg" viewBox="0 0 1200 340" role="img" aria-label="What Is a Letter of Intent (LOI) and How Binding Is It? — PULSE Buildouts"><rect width="1200" height="340" fill="#EBE9DE"/><rect width="14" height="340" fill="#C0531F"/><text x="58" y="116" font-family="Arial,Helvetica,sans-serif" font-size="32" font-weight="800" letter-spacing="3" fill="#C0531F">PULSE BUILDOUTS · COMMERCIAL REAL ESTATE</text><text x="56" y="198" font-family="Arial,Helvetica,sans-serif" font-size="60" font-weight="800" fill="#2b2b2b">Save money. Don’t get screwed.</text><text x="58" y="258" font-family="Arial,Helvetica,sans-serif" font-size="30" font-weight="600" fill="#6b5b4d">Leases, TI, NNN &amp; buildouts — negotiated in your favor</text><g transform="translate(1010,86)" fill="none" stroke="#C0531F" stroke-width="9" stroke-linejoin="round"><rect x="20" y="40" width="150" height="130"/><line x1="20" y1="40" x2="95" y2="6"/><line x1="170" y1="40" x2="95" y2="6"/><rect x="50" y="80" width="36" height="36"/><rect x="104" y="80" width="36" height="36"/><rect x="74" y="128" width="42" height="42"/></g></svg>

# What Is a Letter of Intent (LOI) and How Binding Is It?

## Direct Answer

A **Letter of Intent (LOI)** is a short document — usually **2 to 6 pages** — that spells out the major business terms of a lease deal before lawyers draft the full lease: **rent, term, TI allowance, free rent, square footage, use, and key clauses**. Critically, an LOI is **mostly non-binding on the deal terms** but **selectively binding on a few specific provisions** you must control. The money move: state in plain language that the LOI is **"non-binding except for the confidentiality, exclusivity/no-shop, and governing-law provisions"** — and make sure the **economic terms (rent, TI, free rent) are NOT binding** until a full lease is signed.

The danger is the reverse: an LOI drafted by the landlord may try to bind you to **economic terms** while keeping their delivery and contingency obligations loose. Get it backward and you've locked in a **$40/sq ft rent** with no protections, or accidentally created a binding contract a court will enforce. Negotiate hard at the LOI stage — it sets the anchor for everything, and you have **maximum leverage before you've spent money**.

## What an LOI Actually Does

The LOI is the **deal blueprint**. Whatever you win here, the lease almost always honors; whatever you skip here, you fight uphill to add later. Use it to lock the big numbers and flag your must-have clauses:

- **Economic terms:** **base rent ($/sq ft)**, **annual escalations (commonly 2%–3%)**, **lease term (e.g., 5 or 10 years)**, **renewal options**, **TI allowance ($30–$80+/sq ft)**, and **free rent / buildout period (60–120 days)**.
- **Space terms:** **rentable vs. Usable square footage**, **load factor**, **delivery condition**, **parking**.
- **Key clauses to flag now:** **co-tenancy, exclusive-use, relocation (delete it), HVAC responsibility, assignment/sublease, and a kick-out/termination right**.

If a clause matters to you, name it in the LOI. Silence here is how landlords win the lease draft later.

## How Binding Is It, Really?

The honest answer: **it depends on the words used and how the parties behave** — which is exactly why precision matters. Three rules:

1. **Say it's non-binding — explicitly.** Include a clear statement: *"This LOI is a non-binding expression of interest and creates no obligation to lease except for the binding provisions identified below. No party is bound unless and until a definitive lease is fully executed."* Without this, courts in some states can find an **enforceable agreement** from an LOI plus conduct (deposits paid, possession taken, "agreement to agree" treated as a deal).
2. **Make a few provisions binding — on purpose.** You usually *want* these to bind: **confidentiality**, **exclusivity / no-shop** (landlord can't shop your deal to other tenants for **30–60 days**), **governing law**, and sometimes **good-faith negotiation**.
3. **Keep the economics non-binding.** Rent, TI, term, and contingencies should bind **only in the signed lease**, so you retain the right to walk if due diligence turns up problems.

The classic trap: an LOI that is **silent on bindingness**, includes a deposit, and uses committed language ("Tenant shall lease...") can be argued into a binding contract. Avoid ambiguity.

## The Binding-vs-Non-Binding Split

Here's the split a tenant-favorable LOI should draw:

- **NON-binding (deal can still die):** base rent, escalations, term, TI allowance, free rent, square footage, delivery condition, all contingencies. These bind only at lease signing.
- **BINDING (enforceable from signature):** confidentiality, **exclusivity / no-shop period**, governing law, and a clear statement that nothing else binds without a signed lease.
- **REFUNDABLE:** any **good-faith deposit** held during LOI negotiation must be **fully refundable** if the deal doesn't close. Never put non-refundable money down at the LOI stage.

Drawing this line protects you both ways: the landlord can't enforce the economics against you, but you *can* enforce the no-shop so they don't auction your deal to a competitor.

## Negotiate Hard Here — Leverage Peaks Early

The LOI stage is where you have the **most leverage and the least sunk cost**. Use it:

- **Anchor every number you care about.** First numbers stick. If you want **$35/sq ft and $60/sq ft TI**, put it in the LOI; you'll rarely improve it later.
- **Win the no-shop.** A **30-to-60-day exclusivity** stops the landlord from playing you against other tenants while you spend money on due diligence.
- **Flag clauses you'll demand in the lease.** Name **relocation deletion, co-tenancy, exclusive-use, HVAC caps, and kick-out rights** so they're not a surprise in the draft.
- **Keep deposits refundable and small.** A good-faith deposit is fine; a **non-refundable** one at LOI is a red flag.
- **Set the outside dates.** Target dates for **lease execution, delivery, and rent commencement** so the deal has momentum and accountability.

A strong **tenant-rep broker** runs the LOI for free to you (the landlord pays commission) and routinely turns a landlord's one-sided LOI into a tenant-protective one before a single lawyer dollar is spent.

```mermaid
flowchart TD
    A[LOI drafted] --> B{Bindingness stated?}
    B -->|No| C[DANGER - court may enforce as contract]
    B -->|Yes| D[Non-binding except named provisions]
    D --> E[Binding: confidentiality + no-shop + governing law]
    D --> F[Non-binding: rent, TI, term, contingencies]
    E --> G[Sign LOI]
    F --> G
    G --> H[Due diligence + lease draft]
    H --> I{Lease fully executed?}
    I -->|Yes| J[Economic terms now binding]
    I -->|No| K[Walk away - refundable deposit returned]
```

```mermaid
flowchart LR
    A[LOI terms] --> B[Economic: rent/TI/term/free rent]
    A --> C[Procedural: confidentiality/no-shop/law]
    B --> D[NON-binding until lease signed]
    C --> E[BINDING from signature]
    D --> F[Tenant keeps right to walk]
    E --> G[Landlord can't shop the deal]
```

## Mistakes That Turn an LOI Into a Trap

- **Leaving bindingness silent.** Always state it explicitly. Ambiguity is how a non-deal becomes an enforceable one.
- **Letting economics bind early.** Rent, TI, and contingencies should bind **only at lease signing**, never in the LOI.
- **Skipping the no-shop.** Without exclusivity, the landlord shops your terms to drive a competing bid while you do due diligence.
- **Non-refundable deposits.** Never. Keep good-faith money **fully refundable** until the lease closes.
- **Not flagging key clauses.** If you don't name **relocation deletion, co-tenancy, exclusive-use, HVAC caps**, the lease draft will omit your protections and you'll fight to add them.

Brokers at **CBRE**, **JLL**, and **Cushman & Wakefield** all treat the LOI as the single highest-leverage moment in a lease deal — the place where the economics are won or lost before legal fees ever start.

## FAQ

**Is a Letter of Intent legally binding?**
Mostly **non-binding** on the deal terms, but it can bind a **few specific provisions** (confidentiality, exclusivity/no-shop, governing law) and — dangerously — can be construed as an enforceable contract if it's silent on bindingness and the parties act like a deal exists. Always state explicitly that the LOI is **non-binding except for named provisions**.

**Which parts of an LOI should be binding?**
You generally want **confidentiality, the exclusivity / no-shop period (30–60 days), and governing law** to bind. Keep all **economic terms (rent, TI, term, free rent) and contingencies non-binding** until the full lease is signed, so you retain the right to walk after due diligence.

**Can a landlord back out after signing an LOI?**
Yes, on the **non-binding economic terms** — that's the point of an LOI. But they're bound by any **binding provisions** like the no-shop. That's why winning the **exclusivity clause** matters: it stops the landlord from shopping your deal while you spend on due diligence.

**Should I put a deposit down at the LOI stage?**
A small **good-faith deposit** is sometimes requested, but it must be **fully refundable** if the deal doesn't close. Never agree to a **non-refundable** deposit at the LOI stage — that's a trap that puts your money at risk before any protections are in place.

## Sources

- **CBRE** — Tenant advisory on letters of intent and lease deal-term negotiation.
- **JLL** — Tenant representation guidance on binding vs. Non-binding LOI provisions and exclusivity.
- **Cushman & Wakefield** — Leasing advisory on LOI structure and economic-term anchoring.
- **NAIOP** (Commercial Real Estate Development Association) — Commercial lease negotiation resources, including LOI best practices.
- **BOMA International** — Standard lease process commentary on letters of intent.
- **IREM** (Institute of Real Estate Management) — Property management standards on lease documentation.
- **American Bar Association** — Real Property section commentary on enforceability of letters of intent and "agreements to agree."

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What Is a Letter of Intent (LOI) and How Binding Is It?

What Is a Letter of Intent (LOI) and How Binding Is It?

Direct Answer

What an LOI Actually Does

How Binding Is It, Really?

The Binding-vs-Non-Binding Split

Negotiate Hard Here — Leverage Peaks Early

Mistakes That Turn an LOI Into a Trap

FAQ

Sources

What does the score mean?