You have been looking at buying a retail strip center for some time. It seems to be the perfect place to grow your real estate investments. It has a good base of long-term tenants and a lot of opportunities for out parcels that have not been developed yet.
The asking price on the property is too high for your budget, but you think you can get close. You could just give the person a verbal offer, but that may not be taken seriously.
Sending a letter of intent to purchase the property may be a good option to show that you are serious about the property.
With the letter of intent signed by both parties, you will have the basis of the sales agreement completed and serious negotiations on a contract can start.
Or the seller can look at your offer and reject it, allowing you to move on to another property.
While it is not the final contract, it is a legal document that can be binding, so it is essential you work with the attorneys at The Orlando Law Group to provide everyone the exact and terms of the negotiation, but also to give you protection if something unexpected happens or the seller was negotiating in bad faith.
What is the Letter of Intent
A letter of intent is well described by its name. It is a document that shows the intent of the signers to complete an action. For this article, we’re looking at a letter of intent for purchasing property. You could use one for a lease agreement as well, or to purchase a company too.
There is no set format to a letter of intent and it can have as little or as much as is needed to formulate the basis of a negotiation. The letter of intent can have many parts, but it can have any or all of the following elements:
- The terms of the deal.
- The proposed terms of a seller-financed deal.
- The proposed date of the final sale or expiration date of the letter of intent.
- Any needed items, such as financial documents or existing leases.
- How the buyer will pay for the deal, including a deposit amount and loan company.
- The responsibility for any legal fees.
- Any broker fees and their amount.
- An exclusivity clause to stop any other negotiations.
- A confidentiality agreement.
- Any contingencies that could end the deal.
- Any penalties if the letter of intent is broken.
Why sign a letter of intent?
Frankly, you don’t need to send or sign a letter of intent when purchasing or leasing a property.
But it can be helpful.
As with most legal documents, you are signing a letter of intent as the seller or the buyer for protection. You want to make sure that when you invest a significant amount of time and money negotiating a deal, that time is not wasted if the two sides weren’t close to begin with.
With a letter of intent, you can gain some assurances. For instance, a key part of any letter of intent can confirm exclusivity for negotiations.
Think about it. You work to put the property under contract but find out the seller was using your negotiation to get more from someone else.
You can be protected from this with a letter of intent.
And if the negotiations do fall through for reasons not outlined in the letter of intent, you might be able to recoup some of your legal and other costs, if properly outlined in the letter of intent.
Finally, the letter of intent helps the buyer secure the financing. While the buyer should have already identified how they intend to pay for the property, it gives the bank assurances the deal is legitimate, giving it confidence to underwrite the loan.
Is the Letter of Intent Binding?
While the letter of intent is not an official “contract,” it can be binding even if a contract is never officially signed. In a lawsuit, it could be used to show the intent of both parties and will also provide the courts with the road map to what was agreed upon or not.
As with many areas of the law, the letter of intent may be binding – or not. For the most part, it is best to clearly define the parts of the letter of intent that is binding, if any, with very specific language.
Likewise, if you do not want to be bound by the terms of the agreement, you should also signify that with very specific language too.
The courts have looked at letters of intent in a wide range of circumstances and there is no existing law that says all letters of intent are binding or are not. It really depends on the specific elements of each case.
While there are circumstances that could make a letter of intent non-binding, it should be assumed the letter of intent is like a contract and its terms can be enforced, so only sign a letter of intent if you are sure this is a property you want to buy or sell.
The attorneys at The Orlando Law Group can write or review any letter of intent and let you know what your options and the consequences of signing the letter of intent as our attorneys represent clients in commercial real estate and more in Orlando, Waterford Lakes, Altamonte Springs, Winter Garden, Lake Nona, St. Cloud, Kissimmee, and throughout Central Florida.
If you have questions about anything discussed in this article or other legal matters, give our office a call at 407-512-4394 or fill out our online contact form to schedule a consultation to discuss your case. We have an office conveniently located at 12301 Lake Underhill Rd, Suite 213, Orlando, FL 32828, as well as offices in Seminole, Osceola and West Orange counties to assist you.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.
Last Updated on October 17, 2023 by The Orlando Law Group