Why this matters
The letter of intent sets the economics of your lease before lawyers ever get involved. First-time founders often treat the landlord's first terms as fixed — they are not. Rent, term, TI allowance, and free months are all negotiable, and once they are in the LOI they rarely improve in the lease draft.
What "done" looks like
- A signed LOI covering rent, escalations, term, renewal options, TI allowance, and free rent
- Terms that reflect your contractor's build-out estimate from the previous step
- An explicit statement that the LOI is non-binding on business terms
- You compared asking rents on at least 2–3 comparable spaces
How to do it
- Gather comps — asking rents for similar nearby spaces give you a factual anchor.
- Negotiate more than one lever: base rent, annual escalation, TI allowance, free rent, and renewal options are all trade-able.
- Tie free rent to your build-out timeline so you are not paying for a space you cannot occupy.
- Anchor the TI allowance to your contractor's line-item estimate.
- Get every agreed term in writing in the LOI; verbal promises vanish in lease drafts.
Common mistakes
- Negotiating only base rent and ignoring escalations, CAM, and TI — where the real money moves
- Accepting a "market standard" claim without pulling comps
- Signing an LOI with binding exclusivity that locks you out of other spaces for months
Real-world examples
- Commercial LOIs are, as widely documented practice, non-binding on economic terms — they exist so both sides can negotiate before paying lawyers.
- Free-rent periods covering the construction window are a standard, widely documented concession in retail and restaurant leasing, especially for spaces that sat vacant.
From a founder's point of view
Landlords negotiate leases for a living; most founders do it once. The LOI is the one moment the field can be leveled with comps and a contractor's number — after signatures, every clause tilts toward the landlord.
Rule of thumb
If you accepted the first number on rent, TI, or free months, you didn't negotiate — every line of an LOI is an opening offer.