From Letter of Intent to Signed Lease in Utah

You found a space that works. The next step in most commercial deals is not the lease itself. It is a letter of intent, or LOI: a short document that sets out the main business terms so both sides can decide whether a full lease is worth drafting.

A good LOI saves time. A sloppy one can lock in weak terms you spend the rest of the deal trying to fix. This post covers what an LOI includes, what is binding, a typical timeline, the due diligence to do, and why a Utah attorney should review the documents.

This is general information, not legal advice. Have a Utah attorney review any LOI or lease before you sign it.

What a letter of intent usually covers

• Premises and size. The suite or building, the square footage, and how that square footage is measured.
• Term and commencement. How long the lease runs, when it starts, and when rent starts. Those dates are not always the same.
• Base rent and escalations. The starting rent and how it increases, for example a fixed step each year or an increase tied to an index.
• Free rent. A period at the start of the lease with base rent reduced or waived, offered as a concession. Check whether operating costs are still due during that period.
• Operating costs. Whether the lease is gross, modified gross or triple net (NNN), and what you pay toward property taxes, insurance and common area maintenance. Our post on office vs. flex vs. light industrial space explains how these structures commonly differ by property type.
• Tenant improvement (TI) allowance. How much the landlord contributes toward building out your space, what it can be spent on, who manages construction and what happens to unused money.
• Options. Rights to renew, expand, take nearby space first, or end the lease early, along with the notice deadlines for each.
• Use clause. What you are allowed to do in the space. Keep it broad enough to cover how your business may grow, and make sure the zoning allows it (more on that below).
• Assignment and subletting. Whether you can transfer the lease or sublet part of the space, for example if you sell the company or shrink, and what landlord consent requires.
• Security deposit and credit support. The deposit amount and any letter of credit or other support the landlord asks for.
• Other terms. Parking, signs, access hours and contingencies such as permits.

Example: A hypothetical company compares two LOIs. One offers a higher TI allowance with fewer months of free rent. The other offers more free rent but a smaller allowance. The better deal depends on build-out cost and how long the company will stay, so price both over the full term.

What is binding and what is not

Most commercial LOIs say that the business terms are non-binding. They are a statement of intent, and neither side is obligated to sign a lease until a final lease is signed.

Many LOIs then make a few provisions binding, such as:

• Confidentiality of the terms.
• Exclusivity, where the landlord agrees not to negotiate with others for a set period.
• Costs, such as who pays for plans or legal work if the deal falls apart.

The wording matters. A letter that reads like a final agreement, or leaves out a clear statement about what is and is not binding, can create questions later. Whether a particular LOI creates obligations depends on its wording and the facts, and that is a question for your attorney.

Utah law also expects the final deal to be in writing. Under Utah Code Section 25-5-3, a contract for leasing land for longer than one year is void unless it, or a note or memorandum of it, is in writing and signed by the party making the lease or that party's authorized agent. That is one reason commercial deals move from an LOI to a full written lease signed by both sides.

A typical timeline

Treat this as a sequence, not a schedule.

The lease draft is much longer than the LOI, and terms the LOI skipped (repairs, insurance, defaults, move-out condition) get settled there. Leave time for it.

Due diligence before you sign

The LOI stage is the time to confirm the space will actually work, before the risk shifts to you.

Zoning and use. Confirm with the city's planning office that your use is permitted in the zone, or learn what approval it needs. The use clause in the lease should match.

Business license. Cities often license businesses by location and check that location before issuing a license. Salt Lake City, for example, states on its business licensing page that all commercial business licenses must be reviewed for zoning and building compliance and fire safety code. Check the rules in the city where your space sits.

Permits and building codes. Utah applies a statewide construction code that adopts the International Building Code by reference for construction, alteration, remodeling and repair, with state and local amendments. If your build-out or a change in use triggers code work, such as exits, restrooms, fire sprinklers or ventilation, you want to know who pays for it before the lease is signed.

Accessibility (ADA). If your space is open to the public, both landlord and tenant have duties under Title III of the Americans with Disabilities Act. The Department of Justice's Title III Technical Assistance Manual explains that a lease may allocate those duties between landlord and tenant, but the allocation is only effective between the parties, and both "remain fully liable" for compliance. So decide in the lease who handles what, and do not assume a clause shields you.

The building itself. Check the roof, heating and cooling and other major systems, and who repairs and replaces them under the lease.

Why attorney review matters

There is no standard state form for a commercial lease in Utah. The Utah Division of Real Estate's list of state approved forms covers the real estate purchase contract and related addenda, not a commercial lease or LOI. Each commercial lease is a negotiated document, usually drafted by the landlord's attorney.

A Utah attorney can review what a broker cannot: personal liability, defaults and remedies, indemnities, insurance, and what happens if the business is sold. Bring the attorney in before the LOI is signed, not after the lease draft arrives.

Where a tenant rep fits in

A tenant representative handles the business side: finding options, requesting proposals, comparing them on total cost, and negotiating the LOI and lease business terms alongside your attorney. In many commercial leases, the landlord pays the tenant rep's commission under a written agreement, but terms vary, so get the arrangement in writing. Here is how tenant representation works, or start at the Utah Site Selection home page.

This article is general information, not legal advice. Have a Utah attorney review any LOI or lease before you sign.

Start your Utah site search

If you have a space in mind or an LOI on your desk, we can help you compare terms and line up the questions to ask before you sign. Call or text 801-664-3370 to talk with Stockton Farnsworth, Utah Associate Broker, Team Utah Commercial, brokered by RE/MAX Associates.

General education only, not legal, tax, investment or appraisal advice. Information is believed reliable but not guaranteed. This article was drafted with the help of AI from the sources listed. Published by Stockton Farnsworth, Utah Associate Broker, Team Utah Commercial, brokered by RE/MAX Associates.