Letter of Intent (LOI) for a Houston Commercial Lease or Purchase
What the LOI covers, which parts bind you, and how to use it well on either side
Almost every commercial lease or purchase in the Houston area starts with a letter of intent. The LOI is the short document that lays out the deal before the lawyers draft the long one, and the terms you set here shape everything that follows. Treat it casually and you can give away leverage you never get back. This guide explains what an LOI covers, which parts are usually binding, and how to use it well on either side of the table.
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What a Letter of Intent Is
A letter of intent, sometimes called a term sheet, is a written summary of the main business terms the two sides have agreed to in principle before a full lease or purchase contract is drafted. For a lease it covers rent, term, and concessions. For a purchase it covers price, deposit, and the due-diligence period. It is meant to get the big points settled cheaply, on paper, before anyone spends money on a long contract.
The common misunderstanding is that an LOI is just a friendly, non-binding sketch. Most of it is non-binding, but specific clauses almost always are binding, and courts take those seriously. The skill is knowing which parts commit you and which do not, and writing the document so it protects your position without accidentally forming a contract you did not intend. If you are buying, the LOI also sets up the work covered in our commercial due diligence checklist.
What the LOI Covers
A commercial LOI typically addresses each of these. The last row, the binding provisions, is the one most people overlook.
Six Rules for a Strong LOI
Say plainly what is binding and what is not
The single most important line in an LOI states that only the listed clauses, such as confidentiality and exclusivity, are binding and the rest is subject to a definitive agreement. Leave that out and you risk forming a contract by accident.
Use a no-shop or exclusivity window wisely
A buyer wants the seller to stop marketing the property during due diligence. A seller wants that window short and conditioned on real progress. Either way, make the exclusivity term explicit and time-limited.
Pin down the economics, not just the price
Rent and price get the attention, but concessions, tenant-improvement allowances, free rent, and who pays operating costs often move more money. Spell them out now, because they are far harder to win back in the long-form contract.
Protect the due-diligence period
As a buyer, give yourself enough time to inspect, review leases, collect estoppels and SNDAs, and line up financing before your deposit becomes non-refundable. As a seller, keep that window tight and the deposit meaningful.
Price it against real market data
An LOI built on a number pulled from the air invites a renegotiation later. Anchor rent or price to comparable deals and, for a purchase, to the income the property actually produces.
Keep a broker and an attorney in the loop early
A broker negotiates the business terms and keeps the deal moving. An attorney makes sure the binding clauses say what you think they say. Getting both involved at the LOI stage is far cheaper than fixing a bad term in the lease.
The LOI Starts a Sequence of Documents
The LOI kicks off a sequence of documents. Once terms are agreed, the long-form lease or purchase contract follows, and with it come the estoppel certificates and SNDA agreements that a buyer or lender will require. If your deal is a triple-net lease, the LOI should already flag the operating-expense structure covered in our NNN and CAM explainer, and the rest of the vocabulary lives in the commercial lease glossary.
Because Houston has no zoning, the LOI for a purchase or a lease should confirm that your intended use is actually permitted under the deed restrictions and the lease, not a zoning map. Our guide to deed restrictions and the no-zoning rule explains why that check belongs early, before you are deep into due diligence.
Both Sides of the Deal
The LOI is where both sides of the transaction show up at once. A tenant negotiating a lease is often a business owner who will one day want to buy a building instead of renting, and a buyer signing an LOI to purchase frequently owns something they must sell to fund the deal. If that is you, it is worth knowing what your current holdings are worth before you commit. A broker opinion of value gives you that number, and if a home sale is part of the picture, a free home valuation does the same on the residential side.
On a purchase, the price you write into the LOI should reflect what the property actually earns. Our guide to valuing commercial property and the cap rate explainer show how income and cap rate drive value, so your opening number is grounded rather than arbitrary. When it is time to sell on the other end, a flat-rate listing keeps more of the proceeds available for the next move.
Negotiating an LOI for a Lease or a Building?
A Kingwood-based broker who works both commercial and residential can set the business terms in your favor and tell you what your current property is worth while you plan the next move.
See Commercial ResourcesFrequently Asked Questions
Is a letter of intent legally binding?
Usually only in part. Most of an LOI is non-binding and subject to a definitive agreement, but specific clauses such as confidentiality, exclusivity or no-shop, and governing law are typically meant to bind. The document should state clearly which provisions are binding so nothing commits you by accident.
What should a commercial LOI include?
The core business terms: price or rent, deposit or security, term and options, concessions and allowances, the due-diligence period, how operating costs are handled, and a clear statement of which clauses are binding. Getting these right on paper first makes the long-form contract faster and cheaper.
What is a no-shop or exclusivity clause?
It is a binding promise by the seller or landlord to stop marketing the property to other parties for a set period while the deal is negotiated. Buyers want it so their due-diligence spend is protected; sellers want it short and tied to real progress. Make the window explicit and time-limited.
Do I need an attorney for a letter of intent?
A broker can negotiate the business terms and keep the deal moving, which is most of the LOI. Because specific clauses are binding, though, having a real estate attorney review the binding language before you sign is worth the small cost, especially on a purchase or a large lease.
How long should the due-diligence period be?
It depends on the property, but a buyer wants enough time to inspect, review the leases, collect estoppels and SNDAs, and confirm financing before the deposit becomes non-refundable. A seller wants that window tight. The LOI is the place to set it, so negotiate it deliberately rather than accepting a default.
Can I change terms after signing the LOI?
The non-binding business terms can still move as the long-form contract is drafted, which is exactly why the LOI matters: the terms you anchor here become the starting point, and walking them back later is harder. Set them carefully, because the LOI frames every negotiation that follows.