News & Commentary

In commercial real estate transactions, letters of intent are ubiquitous. They appear absolutely harmless because they are intended to be non-binding and a “tool” for future negotiation. In fact, most letters of intent go out of the way to explicitly state that “it shall not be construed in any way to be legally binding” or that “your signature below merely means you are agreeing to this invitation to negotiate”.

You need to seriously think twice before accepting this ostensibly harmless “invitation“.

While a letter of intent is certainly a preferred tool for commercial brokers and agents because of its convenience and ease of use, the principle risk is inadvertently creating an enforceable contract under the theories of waiver or promissory estoppel because of imprecise drafting or the subsequent conduct of the parties.

Although the basic deal points of a real estate transaction are usually negotiated by the principals involved, letters of intent should be drafted by an attorney who is carefully attuned to the contractual risks inherent in letters of intent. There are certain provisions which should and should not be included so that you do not mistakenly end up litigating in court about what you considered to be a harmless non binding letter or an invitation to negotiate. Contact our firm to draft or analyze your letter of intent.

Have a commercial real estate legal question?  Rogers, Sheffield & Campbell has a Real Estate Law team that can answer it. Contact us at (805) 963-4700 or use the secure form on this page.