Commercial Real Estate Letter of Intent: What Agents in Louisiana Need to Know

What Is a Commercial Real Estate Letter of Intent?

A commercial real estate letter of intent (LOI) is a non-binding document that outlines the major economic and legal terms both parties have agreed to in principle before a formal lease is drafted. It is not the lease. It is the framework the attorneys will use to write the lease — and that distinction matters.

In Louisiana commercial real estate transactions, the LOI typically precedes the lease by several weeks. A well-structured LOI reduces negotiation time, prevents misunderstandings between the landlord's counsel and the tenant's counsel, and gives both parties a clear record of what was agreed at the business level before legal language enters the picture.

For a commercial real estate agent in Louisiana, the letter of intent is one of the most consequential documents you will touch on behalf of your client — and one that most residential agents who cross into commercial work handle incorrectly.

What Does a Commercial LOI Cover?

A standard commercial real estate LOI in Louisiana will address most of the following terms:

• Premises description — the address, suite or floor, and rentable square footage
• Lease term — commencement date, expiration date, and any renewal options
• Base rent — the monthly or annual figure, and whether it escalates (and at what rate)
• Lease structure — gross lease, modified gross, or NNN (triple net)
• CAM charges — if NNN, a cap on controllable CAM increases is a common negotiating point
• Tenant improvement allowance — the dollar amount the landlord will contribute to buildout, if any
• Free rent — the number of months of abated rent during the buildout period
• Security deposit — amount and terms for return
• Permitted use — the specific business use the tenant is authorized to operate
• Exclusivity — whether the tenant has any exclusive right to operate a particular type of business in the center or building
• Broker commissions — confirmation that both parties acknowledge representation and how the commission splits

Non-Binding — With Important Exceptions

The LOI is generally non-binding on the substantive lease terms. That is its purpose — to allow both sides to negotiate without legal consequence if the deal falls through. However, certain provisions within a commercial LOI are typically drafted to be binding, including:

• Exclusivity period — the landlord agrees not to negotiate with other prospective tenants for a defined window while the lease is being drafted
• Confidentiality — the terms of the LOI are kept between the parties
• Broker commission acknowledgment — protects both agents in the transaction

Knowing which provisions are and are not binding — and how to explain that distinction to a client — is part of the commercial agent's job from the moment the LOI is put on the table.

Common Mistakes Louisiana Agents Make With LOIs

The most common error is treating the LOI as a formality. Agents who have not studied commercial leasing tend to accept landlord-form LOIs without reviewing the economic terms carefully, or push LOIs to client signature without explaining what they are agreeing to in principle. Once a landlord's attorney has drafted the lease from an LOI, unwinding a term the tenant's agent failed to catch becomes significantly more expensive.

A second common error is leaving the lease structure undefined. Failing to specify whether the lease is NNN, modified gross, or gross — and what "NNN" means in the context of that specific landlord's CAM calculation — leaves material cost exposure unaddressed. A tenant who signs an LOI on a strip center lease without understanding the CAM structure may face occupancy costs that are 20 to 40 percent above the base rent figure they negotiated.

The LOI and Your Commission

Every commercial real estate agent in Louisiana should include a clear broker commission acknowledgment in the LOI. This is not optional and not a formality. Commissions in commercial leases are paid by the landlord in most Louisiana transactions, but the obligation is created by the lease — which means a commission that was not acknowledged in the LOI can be disputed, delayed, or excluded from the final document. A one-paragraph commission acknowledgment in the LOI is the first line of protection for your fee.