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Why Letter of Intent Is Necessary When it Comes to Securing an Office Space for Lease

Posted by officeguru.sg on June 1, 2022
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We may sometimes wonder why a document called the letter of intent (LOI) is necessary. While the letter of intent is often subject to contract, it is quite a common practice to make an offer to lease an office space with a filled and signed letter of intent.

Show Sincerity to Rent

While an offer can always be verbal, putting pen to paper shows the office space landlord that a prospective tenant has the sincerity to rent the office space. After all, it is easy to verbally make an offer with no other supporting documents. An offer via a signed letter of intent shows more sincerity as compared to a verbal offer which is not in writing.

Intention to Take Up the Lease

With a filled and signed letter of intent, the landlord will be able to know that a prospective tenant has the intention of taking up the lease since the details are listed down with the necessary signatory. After all action speaks louder than words.

Terms Clearly Stated

In a letter of intent, the terms of the offer are also clearly stated. Such terms include start date of the lease, duration of lease, company name of prospective tenant, proposed rental rate, rent-free fitting-out period as well as any other terms and conditions proposed by the tenant. With these details provided in the letter of intent, the landlord will be able to easily review the offer and respond to the offer as there may be more than one offer coming in. With a proper letter of intent done up, chances of the securing the lease is also higher than an offer which is verbal or not in writing.

Accompanied by Good Faith Deposit

Besides the letter of intent, the offer is often also accompanied by the prospective tenant offering the good faith deposit to the landlord. The good faith deposit may sometimes be given via a cheque, via bank transfer or via paynow depending on which mode of payment is acceptable to the landlord. The good faith deposit is often equivalent to a month’s rent and may form part of the security deposit when the offer is accepted by the landlord.

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