After a successful office tour, a tenant will usually have two to four spaces that they will consider for their next office. The use of a letter of intent is helpful to begin the process of deal comparison.
Reasons to have a letter of intent:
Increase the Tenant's Leverage: BY getting all the information from each potential property in the same formate it allows the tenant to easily make comparisons between each offer. It is important that the landlord knows exactly what the tenant needs so they answer the question correctly.
Set Lease Start Date: This is an important date for the tenant but it is even more important for the landlord. The sooner a tenant can move into a vacant space the sooner they can begin to pay rent.
Establish Lease Term: The value of a lease is its income stream. The longer the lease term the more value the lease has for the landlord. This can often result in a reduction in rent. Typically in the form of additional free rent.
Right of First Refusal: If you are a tenant that is expecting to grow you will want to establish your intent for a right of first refusal in your letter of intent.
Parking: It is important to establish how many parking spaces your company will require. It is also important to know if there will be a charge for the parking.
Operating Expenses: Each property may have a different way of charging back operating expenses. This may have an impact on the lease expense.
Utilities: It is important to define the utilities that the tenant will have the responsibility to pay and in a multi-tenant building how the proration is determined.
Rental Rate: The letter of intent is the ideal tool to establish the rental rate in writing. It is also good to determine if free rent is offered how many months are given.
Assignment and Subleasing: If your business plans change it you will need to understand the landlord position on assignment and subleasing of lease space. The time to create your office sublease clause is now.
Renewal Option: The time to being the negotiation of your lease renewal begins before you sign your lease. Establish the terms and conditions of your lease renewal.
These are a few areas of importance when writing your letter of intent. It is important to review each letter of intent and then have a system that allows you to equally compare each offer. We have a proprietary system that we use to make this review easy for our clients.
If you have questions about properly using a letter of intent to increase your leverage in your lease negotiation feel free to contact us. We help office tenants in Frisco, Plano and throughout Dallas to find and negotiate great office deals. We are a Dallas office broker.