Encyclopedia
Letter of intent (LOI)
A short document setting out the main terms of a proposed deal before a binding contract. Whether parts of it are binding depends on its wording.
For example: A buyer sends an LOI with the price and key terms, then the lawyers draft the full agreement. (Illustration only, not a real deal.)
This is a general industry term with no single official definition. Your lease or contract wording controls.
Example only, not a real client. Say you want to buy a light industrial building and send the seller a letter of intent with your price, deposit, subject period and closing date. The seller agrees in principle, and both lawyers turn it into a formal contract quickly, because the main points are already settled.
What I’d tell a friend
Use a letter of intent to agree the main terms early, and be clear which parts are binding and which are not.
Why it matters to you
It frames the whole negotiation. Points you agree to here are hard to reopen once lawyers draft the lease or contract, and points you leave out tend to get decided in the other side's favour.
How to use it in your deal
Parties should state clearly which parts of the LOI are binding, such as confidentiality, exclusivity or costs, and which aren't. Courts may find an LOI binding if it looks like a complete agreement and the parties intended it, so use clear non-binding language if you don't want to be bound. Include the most important business terms, since they're harder to change later.
Have your lawyer review it, even if it's non-binding. Don't stop looking at other options until the deal is firm. Landlords often use LOIs to screen tenants before spending on legal costs. Tenants should push for the terms that matter most to them in the LOI, like inducements, exclusivity, signage, parking and renewal options, while the landlord is keen to land the deal.
Things left for the lease draft tend to come back worded the landlord's way. Set a deadline for signing the lease so the LOI doesn't drift for months, and keep the landlord's standard lease handy to compare.
Mistakes I see
Being bound by accident. Leaving out key terms. Stopping the search too early.
In BC and Vancouver
Contract law governs; case law on binding LOIs is on CanLII.
Official sources: CanLII (court decisions)
What it does
A letter of intent sets out the main terms of a deal before the formal contract, such as price, deposit, subjects, timing and any key conditions. It is often used in leasing as well as sales.
It lets both sides find out early whether a deal is possible, before spending money on lawyers and reports.
Writing it well
Most of a letter of intent is usually non-binding, but some parts, such as confidentiality or a period when the seller agrees not to talk to other buyers, may be meant to bind. Say clearly which parts are which.
A letter that reads like a contract can be treated as one, so check with a BC lawyer on the wording before you sign.
What usually binds
A letter of intent (LOI) is usually an outline for the real deal. Price and most business terms are often written as non-binding. Some pieces, like confidentiality or exclusivity, can still bind you once both sides sign.
Say clearly which clauses bind and which do not. In BC, treat a detailed offer to lease differently from a soft LOI, and have a lawyer review anything you are about to sign.
Questions to ask before you sign
- Is it binding?
- What terms are included?
- Is there exclusivity?
- Has my lawyer reviewed it?
Keep reading
Related terms: Offer to lease, Subject clause
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General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.