The 5 Costly Mistakes Tenants Make in a Commercial Lease LOI

If you’re a business owner who’s just received a Letter of Intent (LOI) for a commercial lease, you’re probably feeling a mix of excitement and pressure.

You’ve found the space.
The landlord wants to move fast.
And the LOI looks short, friendly, and mostly non-binding.

Here’s the reality: this is the most important and riskiest stage of the commercial leasing process for tenants.

We’ve reviewed and negotiated dozens of commercial leases over the years, and most bad leases don’t start with bad leases. They start with careless LOIs.

Below are the five most costly mistakes we see tenants make at the LOI stage, and what you should be thinking about before you sign anything.

Mistake #1: Treating the LOI as “Non-Binding” and Harmless

Landlords often describe an LOI as “non-binding” or “just a starting point.” Technically, that’s true. Practically, it’s dangerous.

In most deals, the lease is drafted directly from the LOI. Once the LOI is signed, landlords rarely revisit core business terms. Instead, tenants hear:

“This just reflects what we already agreed to.”

At that point, leverage is gone.

If a term matters to your business, it needs to be addressed in the LOI — not saved for later.

Mistake #2: Agreeing to Rent and Term Without Understanding the Real Cost

LOIs usually highlight:

• Base rent
• Lease term
• Free rent or concessions

What they often gloss over is the true, long-term cost of the lease.

We routinely see tenants agree to terms that look reasonable on paper, only to discover later that:

• Rent escalations compound faster than expected
• Operating expenses and CAM charges are significant
• “Free rent” disappears due to build-out delays

By the time the math is clear, the LOI has already locked in the economics.

If you haven’t modeled the total cost of the lease, you’re negotiating blind.

Mistake #3: Leaving Guarantees and Security Deposits “To Be Determined”

This is one of the most common and most expensive LOI mistakes.

LOIs often say:

• “Personal guarantee: TBD”
• “Security deposit: market”

From a tenant’s perspective, that sounds flexible. In reality, it usually means maximum landlord protection later.

When guarantees aren’t addressed early, they often show up in the lease as:

• Full personal guarantees
• Large security deposits
• Letters of credit that tie up working capital

Once rent and term are agreed, tenants have little leverage to push back.

If personal risk matters to you, it needs to be negotiated at the LOI stage.

Mistake #4: Ignoring Exit Rights and Flexibility

Businesses evolve. Sometimes faster than expected.

The LOI stage is often the only meaningful opportunity to negotiate:

• Early termination rights
• Assignment and sublease flexibility
• What happens if you sell your business

Once the lease term is set, landlords are far less open to discussing exit options.

We regularly see tenants stuck in spaces that no longer fit their business because they assumed flexibility was standard.

It isn’t.

A smart lease isn’t just about getting into the space — it’s about preserving options if things change.

Mistake #5: Overlooking Build-Out, Delivery, and Timing Issues

For many tenants, especially startups and growing businesses, build-out issues create the biggest problems.

Common LOI gaps include:

• Unclear delivery condition
• Vague improvement responsibilities
• Rent starting before the space is usable
• No protection if the landlord delivers late

When these points aren’t addressed early, disputes almost always follow — and tenants usually pay the price.

If your business depends on opening by a certain date, the LOI must reflect that reality.

What to Do When You Receive a Commercial Lease LOI

The best time to involve a commercial lease attorney is when the LOI arrives — not after the lease is drafted.

At the LOI stage, small changes can:

• Reduce long-term costs
• Limit personal liability
• Preserve flexibility as your business grows

Once the LOI is signed, those same changes are far harder — and sometimes impossible — to make.

How Bend Law Group Helps Tenants at the LOI Stage

We work with business owners who:

• Have received a commercial lease LOI
• Want to understand what’s negotiable
• Don’t want to lock themselves into a bad deal

If you’ve been handed an LOI and aren’t sure what to do next, that’s normal — and it’s exactly the right moment to get guidance.

The decisions you make at the LOI stage shape the entire lease.

If you would like to discuss the strategy for negotiating your commercial lease LOI, contact Bend Law Group at info@bendlawgroup.com.

‍Disclaimer: This article discusses general legal issues and developments and is provided for informational purposes only. It may not reflect the most current law in your jurisdiction. These materials are not intended, and should not be taken, as legal or tax advice for any particular set of facts or circumstances. No reader should act or refrain from acting based on any information contained in this article without seeking appropriate legal or tax advice from counsel in the relevant jurisdiction. Bend Law Group, PC expressly disclaims all liability with respect to actions taken or not taken based on the contents of this article.