A commercial letter of intent (LOI) in Arizona: what to include depends on the deal, but for a Tempe office space purchase it should lock in purchase price, timeline, due diligence rights, and earnest money before the parties move to a binding purchase contract.
By David Pierce, MHG Commercial
What Is a Letter of Intent in a Commercial Real Estate Deal
A letter of intent, or LOI as most Arizona brokers call it, is the document that opens formal negotiations on a commercial real estate transaction. Before either side spends money on appraisals or attorney review, the LOI puts the broad strokes of the deal on paper: buyer, seller, property, and a starting purchase price.
Most commercial brokers use the LOI to test whether a deal is worth the cost of due diligence and legal drafting. It is a negotiating tool, not the final contract; financing, title, and closing mechanics get worked out later in the purchase agreement.
A Commercial Letter of Intent in Arizona: What to Include
A commercial letter of intent in Arizona typically covers a defined set of deal points: the property description, the purchase price, the proposed closing timeline, the due diligence period length, and the earnest money deposit amount. A well drafted LOI for a Tempe office building usually also adds:
- The buyer's intended use of the property and any zoning or occupancy conditions
- Financing contingencies, including whether the purchase depends on the buyer securing a loan
- Broker representation and how commissions get paid at closing
- A target date for moving from the LOI to a signed purchase contract
- Confidentiality language covering financials, rent rolls, and tenant information shared during negotiations
The LOI's key terms exist to narrow the gap between buyer and seller before either party pays for a survey, an environmental report, or attorney time on a full purchase agreement. A seller who will not commit to a price range, or a buyer who will not commit to a due diligence window, is usually signaling the deal isn't ready.
Which Deal Points Belong in the LOI Versus the Purchase Contract for a Tempe Office Building
The LOI states intent, the purchase contract states obligation. For a Tempe office building, the LOI should cover purchase price, earnest money, the due diligence period, and the closing timeline, not every representation, warranty, or default remedy. That level of detail belongs in the purchase and sale agreement, drafted with counsel once both sides agree the LOI's deal points are acceptable.
Title insurance, environmental indemnities, estoppel certificates, and breach remedies are purchase contract territory. Negotiating that detail inside the LOI usually slows the deal down without adding real protection.
Is a Commercial Letter of Intent Legally Binding in Arizona
In most cases, a commercial letter of intent in Arizona is not legally binding on the core deal terms, purchase price, property description, and closing date included. Courts generally look at the language the parties used: if the LOI states it is non-binding, that language usually controls. Certain provisions inside an otherwise non-binding LOI can still be binding on their own, most commonly confidentiality clauses, exclusivity periods, and earnest money forfeiture terms.
Because binding and non-binding provisions sit in the same document, every LOI should state plainly which parts are binding, or it invites a dispute over what the parties actually agreed to.
Can a Seller Back Out After Signing a Commercial LOI
Usually, yes. If the LOI's core terms are drafted as non-binding, either side can walk away before the purchase contract is signed. The exceptions are provisions the LOI marked as binding: an exclusivity period that blocks the seller from shopping the property to other buyers, or an earnest money term that penalizes an early withdrawal. A seller who signed a binding exclusivity clause and then negotiates with another buyer during that window may be exposed to a breach claim, even though the price itself was never binding.
Due Diligence, Contingencies, and Earnest Money for a Tempe Office Building Purchase
The due diligence period is where the buyer verifies everything the LOI assumed: a title review, a survey, an environmental assessment, a review of existing leases and rent rolls, and an inspection of major building systems, roof, HVAC, electrical, and life safety. The LOI should state the length of the due diligence period and whether it can be extended, since a multi-tenant building often takes longer to review than a single-tenant property.
Earnest money in the LOI signals the buyer's seriousness and protects the seller if the buyer walks away without cause once contingencies expire. The LOI should specify the deposit amount, whether it is refundable during due diligence, and when it becomes non-refundable and applies toward the purchase price at closing. Earnest money on Arizona commercial deals is usually a percentage of the purchase price rather than a fixed figure, and it varies with deal size and competitiveness; your broker can advise on what is typical for a comparable Tempe office deal.
From LOI to Purchase Contract: Timeline and What Comes Next
How Long Does LOI Negotiation Typically Take Before a Purchase Contract
LOI negotiation on a commercial office deal often runs a few days to a few weeks, depending on how far apart the parties start and how many rounds of redlines it takes to land on price, due diligence period, and earnest money terms. A well priced Tempe office building with a motivated seller can move faster.
What Happens After Both Parties Sign the LOI on a Tempe Office Property
Once both sides sign, the buyer deposits earnest money, the due diligence period begins, and attorneys start drafting the purchase and sale agreement using the LOI's terms as the outline. A broker at Pierce Commercial Real Estate keeps both sides moving toward a signed purchase contract on the timeline the LOI set.
What Happens if the Purchase Contract Terms Differ from the LOI
Because most LOI terms are non-binding, the purchase contract can differ from the LOI, particularly on details the LOI addressed only in general terms. If due diligence turns up something the LOI did not anticipate, either party can ask to renegotiate before signing. A party who wants specific LOI terms protected against renegotiation should have marked those terms as binding when the LOI was signed; otherwise, the purchase contract is where final terms get set.
Do You Need a Lawyer, and How Is an LOI Different from a Purchase and Sale Agreement
Do You Need a Lawyer to Write a Commercial Letter of Intent in Arizona
A commercial broker typically drafts the initial LOI letter using terms the buyer and seller negotiate directly, but a real estate attorney reviewing it before signing is a reasonable step on a deal of meaningful size or with unusual terms. An attorney matters more once the deal moves to the purchase and sale agreement, where obligations get finalized.
What Is the Difference Between an LOI and a Purchase and Sale Agreement
The LOI outlines intent and the major deal points. The purchase and sale agreement is the binding contract that transfers the property, including representations, warranties, title and survey requirements, and closing mechanics the LOI never addresses in detail. Signing the LOI starts the clock on due diligence; signing the purchase contract commits both parties to close, subject to whatever contingencies remain.
Frequently Asked Questions
What happens if the buyer's financing falls through after the LOI is signed? If the LOI's financing terms are non-binding, most buyers can walk away before the purchase contract is signed, though what happens to any earnest money depends on what the LOI specified. Once the deal moves to a purchase contract, the financing contingency written there controls instead.
Can you negotiate terms after signing a commercial LOI? Yes. Because most LOI terms are non-binding, either party can raise new issues during due diligence and negotiate changes before the purchase contract is signed. What usually cannot be renegotiated are provisions the LOI marked as binding, such as an exclusivity period or a confidentiality clause.
Does an LOI need to be recorded with the county? No. A letter of intent is a private negotiating document between buyer and seller, not a recorded instrument, and nothing about it appears in the public record until closing, when the deed and related documents are recorded.
What is the risk of skipping the LOI and negotiating the purchase contract directly? Both sides invest in attorney drafting before confirming they agree on price, timeline, and due diligence terms. The LOI is a lower cost way to test alignment first, so disagreements that could have been resolved in a short document don't surface only after legal fees are spent.
Talk Through Your Tempe Office LOI Before You Sign
Before you send or respond to a letter of intent on a Tempe office building, a second read from someone who negotiates these deals regularly can catch terms worth revising. Contact our brokerage to walk through your LOI and the deal points that matter most for your purchase.
