Many times we are asked by clients what is the difference between a LOI and a RFP and what do the acronyms mean? Generally speaking, both are documents used to negotiate the business terms of a transaction but the manner in which each are used should be strategically considered between you and your commercial Realtor.
A LOI is a “Letter of Intent” which is a formal declaration of a tenant or buyer’s intent to lease or purchase a particular property and is in no way binding upon either party. Any lease or purchase agreement resulting from these negotiations will be subject to other terms and conditions of a binding contract that will be acceptable to both parties.
A “Request for Proposal” also known as a RFP, is a solicitation made by a tenant interested in leasing space in one of a select few number of buildings. Such RFP outlines the terms and conditions that are specific to the particular needs of the tenant and allows a landlord to respond to each item individually. A RFP typically includes more than just a request for lease rates. Other important items include but are not limited to: term, tenant improvements, options, and the list goes on and on. A well-structured RFP allows a tenant to easily compare landlord responses on an apples to apples basis.
Many times both LOIs and RFPs will go through multiple rounds of back and forth negotiations before all the business terms are agreed upon. Once there is a clear meeting of the minds, one of the two parties will have their attorney draft a formal contract to memorialize the transaction.