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Knowing when to send a Letter of Intent (LOI) versus a Request for Proposal (RFP) can help you lease commercial space more strategically and avoid wasting time.
What is a Request for Proposal?
A Request for Proposal (RFP) is a non-binding document that is commonly used when leasing commercial property that tenants use to solicit proposals from landlords. The goal is to gather information about available commercial properties that meet specific needs and criteria set forth by the individual seeking to lease space.
When to Use a Request for Proposal (RFP)
You’re still in the shopping and comparison phase and want to gather proposals from multiple landlords before narrowing down your options.
✅ Best for:
- Collecting and comparing offers from multiple landlords simultaneously
- Encouraging landlords to compete for your tenancy
- Communicating your space needs and lease requirements
- Getting detailed information from landlords (e.g., rent, CAM, TI allowance, lease term, free rent, etc.)
- Creating a competitive environment between landlords
- Starting the negotiation process without committing
📝 What an RFP typically includes:
- Your space requirements (size, use, layout needs)
- Desired lease term and start date
- Required parking or utilities
- Improvement/renovation needs
- Request for TI allowances, free rent, etc.
What is a Letter of Intent in Commercial Leasing?
A Letter of Intent (LOI) is a non-binding proposal from a tenant to a landlord that includes details such as the lease term, rental rate, any tenant improvement allowances, escalation clauses, deposit amounts, and renewal options. It might also cover other specifics like exclusivity rights or use restrictions. By laying out the primary terms early on, an LOI helps both parties understand each other’s expectations and can streamline the negotiation process, reducing ambiguity before investing in a more detailed lease document. While it isn’t the final binding contract, the LOI often serves as the foundation for drafting the official lease Once both parties agree on these key points, they proceed to the commercial lease agreement where all terms are legally detailed.
When to Use a Letter of Intent (LOI)
You’ve identified one space you’re serious about and are ready to begin negotiating key business terms before the lease is drafted.
✅ Best for:
- Signaling strong interest in a specific space
- Locking in deal terms (e.g., rent, term, TI allowance) before drafting a lease
- Serving as a starting point for the lease agreement
- Saving time and legal fees by outlining agreement on major terms first
📝 What an LOI typically includes:
- Basic identifying info (parties, property address)
- Proposed lease term, rental rate, increases
- TI allowance, free rent, operating expenses
- Security deposit, renewal options
- Exclusivity or use clauses
- Timeline for lease execution
If you’re representing yourself, having a commercial broker can really help during the RFP and LOI stages to ensure you’re asking for everything you should.
