Article -> Article Details

In the world of commercial real estate, the Letter of Intent (LOI) plays a pivotal role in kickstarting the sale or purchase process. At Jostock & Jostock, P.A., we know that getting this document right from the start can save you valuable time, reduce legal costs, and prevent confusion between parties.

This blog will explain what an LOI is, why it matters so much in commercial property deals, and how to prepare one effectively to protect your interests.

What Is a Letter of Intent?

A Letter of Intent is a preliminary document where buyers and sellers outline the key terms they’ve agreed upon for a commercial real estate transaction. Think of it as a written agreement on the main business points before creating a formal and binding purchase contract.

An LOI usually covers:

• The purchase price

• Closing schedule

• Due diligence periods

• Contingencies and conditions

• Other fundamental terms

Its purpose is to ensure that both sides understand and agree on the basic framework of the deal before investing time and money drafting the final contract.

The Importance of an LOI in Commercial Real Estate Deals

Creating a full purchase agreement can be a lengthy and complex process. Often, it involves back-and-forth negotiations and several revisions with attorneys, which can take weeks or even months—and lead to substantial legal expenses.

An LOI offers key advantages by:

• Clarifying major terms early: Helps prevent wasted effort if the parties aren’t on the same page.

• Saving time and legal fees: Streamlines the negotiation process by settling essential points upfront.

• Setting clear timelines: Establishes deadlines for due diligence and contract completion to keep things moving.

Overall, a well-drafted LOI smooths the path to closing the transaction and reduces potential conflicts.

Are Letters of Intent Legally Binding?

Although most LOIs clearly state they are non-binding, Illinois courts will closely examine the document’s wording and the parties’ intent to determine if a binding agreement exists.

For example, in Brunette v. Vulcan Materials Co., the court ruled that if the parties expect to be bound only after signing a formal contract, then no binding agreement arises from the LOI alone—even if key terms are agreed.

Similarly, Leekha v. Wentcher emphasized that no contract forms if both sides intend to be legally bound only once a formal agreement is executed.

Because of this, it is critical that the LOI explicitly states whether it is intended to be binding or non-binding. Ambiguity here can lead to unintended obligations or legal disputes.

How to Draft a Clear and Effective LOI

To make your LOI work effectively without creating confusion or unintended liability, follow these best practices:

1. Specify all key terms clearly. Include price, closing date, contingencies, and other important details.

2. Include an unmistakable non-binding clause, if that’s your intention.

3. Set deadlines for due diligence and contract negotiations.

4. Use straightforward language to avoid misinterpretation.

A well-prepared LOI helps keep negotiations focused and reduces the chance of costly misunderstandings.

Why It’s Wise to Get Legal Help

While it might seem easy to draft an LOI yourself, consulting an experienced attorney is invaluable. Legal experts ensure your LOI reflects your goals accurately and protects you from potential disputes or unintended commitments.

At Jostock & Jostock, P.A., we specialize in commercial real estate law and can guide you through the entire transaction process—from preparing LOIs to closing agreements.

Contact Jostock & Jostock, P.A. for Trusted Legal Support

If you’re involved in buying or selling commercial property and want to make sure your Letter of Intent and contracts are drafted properly, reach out to Jostock & Jostock, P.A. Our knowledgeable team is ready to help you navigate every stage of your real estate transaction smoothly and confidently.

Starting with a well-drafted LOI is your first step toward a successful deal—let us help you get it right.

Contact Jostock & Jostock, P.A. today to discuss your commercial real estate transaction and secure your interests from the outset.