Most commercial landlords treat the letter of intent as a procedural formality, a way to confirm that a deal is moving forward before the real negotiation begins, and that framing consistently costs them. By the time both parties sign an LOI, the landlord has typically already locked in the provisions that will do the most economic damage in the lease: the free rent period, the TI allowance, the renewal option structure, and any exclusivity commitments. The LOI does not precede the negotiation but functions as the negotiation itself, and landlords who fail to recognize that routinely hand tenants their best terms before a lease draft ever circulates.

‍

Why "Non-Binding" Does Not Mean "Without Consequence"

LOIs are structured as non-binding to preserve flexibility and avoid premature legal commitment, but the practical effect of a signed LOI is far more constrained than that label implies. Once a landlord signs an LOI confirming a six-month free rent period and a $50 per square foot TI allowance, those figures become the baseline for every conversation that follows. A tenant's counsel will treat any attempt to revise those numbers in the lease as a breach of the agreed deal, regardless of what the LOI's non-binding language technically permits. Experienced tenant representatives understand this dynamic well, which is precisely why they negotiate LOI economics as aggressively as they negotiate lease terms.

The landlord's leverage is highest before the LOI is signed and declines steadily from that point forward. After execution, the landlord is negotiating against a document that the tenant can wave as evidence of the agreed deal, and any rollback of economic terms risks blowing up a transaction that has already consumed weeks of broker time and internal approval energy. The window to protect the landlord's position in the lease is the window before the LOI closes.

‍

Free Rent Periods: The Concession That Compounds

Free rent is the provision landlords give away most carelessly at the LOI stage. A request for three months of free rent looks reasonable on its face, particularly in a market where concessions are running high, but what the LOI negotiation rarely forces a landlord to think through is the compounding effect of free rent against the lease's other economic terms. If the lease includes annual rent escalations, the free rent period sets the baseline from which those escalations are measured, meaning the landlord is not just deferring rent for three months but potentially starting the escalation clock from a position of underperformance.

More consequentially, free rent agreed to in the LOI often gets treated as a floor in the lease rather than a ceiling, because tenant counsel uses the LOI as the interpretive baseline when lease language is ambiguous or silent on abatement scope. Tenant counsel may argue that the LOI's free rent period was intended to apply differently across base rent and CAM obligations, or that a construction delay entitles the tenant to extend the period, or that a co-tenancy failure triggers additional abatement beyond what the LOI contemplated. A landlord who negotiated the LOI with a clean three-month concession in mind can end up with materially more abatement exposure in the lease if the LOI language was not precise about what the free rent does and does not cover.

‍

TI Allowances: Committing Capital Without a Scope

Tenant improvement allowances are among the most financially significant commitments in a commercial lease, and they are almost always agreed to at the LOI stage without the scope of work needed to evaluate whether the number makes sense. A landlord who agrees to $40 per square foot in TI allowance before seeing a space plan has committed a fixed dollar amount against an open-ended construction obligation. If the tenant's buildout turns out to be more complex than anticipated, or if construction costs escalate between LOI and lease execution, the tenant will expect the landlord to honor the allowance figure from the LOI regardless of the gap between the number and the actual cost of the work.

The LOI should establish not just the TI allowance figure but the conditions under which it can be accessed, the approval process for the scope of work, and any landlord work letter provisions that will govern how the improvement process operates. A TI allowance agreed to in an LOI without those parameters attached gives the tenant a number to quote and the landlord no mechanism to control how that capital is deployed.

‍

Renewal Options: Structural Commitments With Long Tails

Renewal options are frequently included in LOIs as good-faith signals that the landlord is committed to a long-term relationship with the tenant, but they are also among the most consequential structural commitments a landlord can make, because a renewal option agreed to at the LOI stage will govern the landlord's ability to redevelop, re-tenant, or reposition the property for years beyond the initial term. An LOI that confirms a tenant's right to renew for two additional five-year terms at fair market rent without specifying how that rent will be determined, whether the landlord retains any recapture rights, or what operational conditions must remain satisfied for the option to stay available has effectively committed the landlord to that tenant's occupancy for fifteen years on terms the landlord cannot control. Vague renewal language in an LOI does not get clarified in the landlord's favor during lease drafting; it gets expanded, because the tenant's counsel will argue that any ambiguity in the option structure should resolve consistent with the tenant's reasonable expectations at the time of signing.

‍

Exclusivity Language: The Provision That Affects Every Other Tenant

Exclusivity commitments are the LOI provision most likely to create problems the landlord has not fully anticipated. A tenant who secures exclusivity language in the LOI preventing the landlord from leasing to competing uses has effectively taken a property right that extends beyond their own space, and the breadth of that right depends entirely on how the exclusivity is defined. An LOI that references exclusivity without a clear definition of the protected use category, the affected area of the property, and the remedy for a violation has created an obligation the landlord cannot confidently manage.

Exclusivity agreed to in the LOI will be incorporated into the lease as a negotiated term, and the tenant's counsel will hold the landlord to the LOI's language when defining the scope of the restriction. If the LOI language is vague, that ambiguity will generally resolve in the tenant's favor in negotiation. The landlord's position is to define the protected use as narrowly as the deal allows at the LOI stage and to resist any attempt to expand that definition when the lease is drafted.

‍

Signing an LOI That Advances the Deal Without Surrendering the Lease

None of this means landlords should resist signing LOIs or approach every term as a battle. LOIs serve a legitimate function in confirming deal structure, managing broker relationships, and providing both parties with confidence that the transaction is real before either side invests heavily in lease drafting. The point is that the LOI should reflect the same level of attention to economic consequences as the lease itself, not because the LOI is legally binding but because it will function as the deal's definitive record for every negotiation that follows.

Landlords who work with specialized lease counsel from the LOI stage, rather than waiting until a lease draft is circulating, consistently retain more flexibility in the lease and achieve better economic outcomes. The provisions that protect a landlord's long-term position in a commercial lease are far easier to secure before the LOI is signed than after.