What is a "letter of intent" used for in commercial real estate?

A "letter of intent" serves as a preliminary agreement that outlines the fundamental terms and conditions between parties considering a business transaction, often in the context of commercial real estate. It is a non-binding document that articulates the intent of parties to proceed with negotiations toward a potential deal, serving as a roadmap for what they hope to achieve. By clarifying key aspects, such as price, property details, and timelines, it helps ensure that both parties are aligned before entering into a formal contract.

The use of a letter of intent is particularly valuable as it facilitates discussions, allowing both sides to identify and address any concerns or points of negotiation early in the process. This can help to prevent misunderstandings later on and lay the groundwork for a successful transaction.