Lease Purchase with Option to Buy Commercial - Letter of Intent

[Juel McGhee]

I need assistance with the terms of this LOI. The owner has a building that my client will have to bring up to par for their use. The will have to spend 160k in order to operate. For that reason, they only want to do the deal with the option to buy. They are not able to buy the property now, but will in 1 year. They will need 8 months minimum build out time to even open the door. The owner is asking for a price that the building will be worth once my client repairs it and says they don't want a lease purchase. Any helpful terms, clauses, or sample LOI would be helpful

[Joel Owens]

If the owner doesn't want to sell then they do not want to sell. If they do sell they want a premium price. If this building is in a great location then the owner likely has multiple types of tenants looking at the space.

If the area is marginal and not many tenants looking at the space then you might have more leverage. Sometimes when tenants sign a lease they put in a (ROFR) right of first refusal. This means that in the future if the seller ever wants to sell the property the tenant has a certain amount of time specified in the lease to match the written offer and terms from another buyer that came in and the seller has agreed to.

If the tenant does not want to agree to that price and terms then the seller can accept the other offer.

Sometimes a tenant wants a ROFR just in case the seller sells cheap later on but does not want to match the offer if a 1031 buyer paying the seller a low cap rate. In that case they usually want to keep renting and take a tax accounting deduction.  

Is this building a single tenant with your client or going to have multiple tenants in it?

No legal advice given.