Letter of Intent Content

[Zachary Webster]

Hi all,

We are in negotiations on a commercial property and I have concerns about the following two sections we had written into our letter of intent:

- Certificate of Occupancy: Shall be applied for by Purchaser with the Seller responsible for any existing code violations.

-Seller counter: The sellers wants to cap this at a certain dollar amount: $500-1000.

-My thoughts: they already went through cert. and therefor there shouldn't be any/many. They should be responsible for the new cert. and knowledgeable of what code violations there may be

- Other: Seller agrees to refrain from negotiating with any other prospective purchaser(s) or entering into an agreement to sell the Property for a period beginning with the execution of the Letter of Intent through the expiration of the Due Diligence Period so long as Purchaser is proceeding with its Due Diligence and/or is negotiating the Contract.

- Seller counter: seller will continue to market and accept backup offers. 

- My thoughts: hard to police this, but if they accept back up offers then this could drastically affect our negotiation during our due diligence period.

Thank you in advance for your comments.

[Joel Owens]

What exactly are you trying to do with the purchase? The CO is more for a tenant wanting to go into the space but you mention buying the property. Are you trying to purchase and have your business occupy 50% of the space with an SBA loan?

If the seller is wanting to cap code violations they must know the building is in serious disrepair. As a seller I would not agree to ANY with language as it is unlimiting in nature.

LOI is typically non-binding so until you get to signed PSA and put up earnest money (skin in the game) then a seller will usually not give you an exclusive.

In LOI we try to give a reasonable time frame where we have an exclusive like 10 days. Sometimes sellers will not go for it.

In PSA I have  a list of items seller must provide and UNTIL ALL items are provided the due diligence period does not start. This makes the seller show all documents upfront (good,bad,ugly) to see if it still make sense to proceed. If this is not in there the seller can give the docs with no issues upfront and then as the buyer gets heavily involved with attorney fees and lender report costs etc. then drop it on them right before due diligence expires with limited time to review.

No legal advice given.