Read This Before You Sign a Letter of Intent
An older couple received a letter of intent, or LOI, about land a solar company wanted to lease, but it exhibited some valuable-to-know red flags.


Arizona readers Sandy and Jim, both 80, sent me this email with an offer they almost accepted: “We own 100 acres of land ideal for a solar farm and just received a letter of intent (LOI) from a San Francisco company wanting to lease it. All we do is pay taxes on it, so we were about to sign and return the document when we came across your article ‘Leases of vacant land for solar farms pose great risks to owners.’ What do you think of this LOI? Thanks.”
After reading, I handed the LOI to my paralegal, Anne, and said, “Please give me your opinion of this LOI.” She carefully went through the document. After handing it back to me, she said, “This has made not just my day, but my entire week. It is laughable. Thank goodness they found your article.”
Hanford, Calif., real estate attorney Ron Jones, who helped me with that earlier article, agreed with Anne. He explained the elements of a letter of intent.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
What is a letter of intent?
A letter of intent, or LOI, Jones says, “outlines the basic terms of a proposed contract, lease or option (and is) sent to the property owner in hopes that an eventual agreement will be accepted. Consider it a knock on your door, with an, ‘I am interested in your property on these terms.’ The ‘property’ can be anything from industrial machinery, a million-dollar yacht, a business, employment to land. In most cases, a letter of intent is not an enforceable contract, but some of its specific contents might be! So, if you receive one and are tempted to sign, it would be a mistake not to have it reviewed by a lawyer who can clarify points you might not fully understand.”
An LOI is essentially a “cut to the chase” designed to benefit the offerer by saving the time and expense of drafting a tailor-made agreement for someone who might be uninterested in selling or leasing the property.
Watch out for these clauses in an LOI
Jones cautions, “An LOI can lead to some real problems, especially if it contains language that was in the one sent to your readers.” For example:
Confidentiality. “This agreement will be treated in confidence and no disclosure will be made without Tenant or Landlord’s prior written consent, except as required by law.” (More on this below.)
Exclusivity agreement. “Owner agrees that until the earlier of (a) signing of a lease, or (b) 300 days after the execution of this LOI have passed, the property shall be withdrawn from the market and owners will have no discussions or negotiations with any third parties concerning its possible sale, lease or the offer itself.”
Jones points out, “Considering these two clauses together mean that this Arizona couple may be forbidden to discuss the terms of the LOI with their own real estate adviser, and the property will be in limbo for almost a year! Just imagine if much better offers come in? The owners can’t discuss them! This is over-reaching.”
It’s now or never. A cover letter to the LOI gave the couple two weeks to respond or the offer would lapse, resulting in the hoped-for response: “They are offering us a great deal of money per acre, and we certainly don’t want to let this thing die on the vine,” Jim wrote.
Jones’ take? “The solar farm developer is putting pressure on the couple, and it may be considered elder financial abuse since they know all about them — especially their ages. It is pure nonsense, because the land isn’t going anywhere. They should contact the company and say, ‘We understand you would like this signed quickly, but we need time to run it by our family lawyer.’ It is virtually certain they will agree and just ask to be kept informed.”
Jones adds, “And if the response is, ‘We need it by that date or all bets are off,’ then they’ve just done the couple a real favor, because these guys can’t be trusted.”
Unreasonably long due diligence time frames. Due diligence is designed to lessen risks to the party financing the project and to discover the potential impacts on the site. This may require input from civil engineers as well as archaeological, environmental, water, land and title experts. Typically, this takes anywhere from eight to18 months.
“However, it is a two-way street,” Jones underscores. “Before committing to a long‑term relationship with a developer, the owners need to conduct their own due diligence to be certain they are dealing with a legitimate company that has a good reputation. Therefore, research their online presence, including reviews and serious complaints and get references from others who have leased to them.”
The LOI had a total of five years’ worth of “extended due diligence days.” To Jones, “attempting to tie up the property for all these years is excessive. Even though the developer offered to pay some cash per extension, they could have finished their due diligence and said, ‘Sorry, we can’t do it,’ and just walked away.”
Consequently, we suggested to my readers that they could either attempt to renegotiate the offer or walk away. And they walked!
It’s always a good idea to consult with a lawyer if you receive an unexpected LOI.
Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, "You and the Law." Through his column, he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift."
-
Stock Market Today: Stocks Stable as Inflation, Tariff Fears Ebb
Constructive trade war talks and improving consumer expectations are a healthy combination for financial markets.
-
What Trump’s 'Big Beautiful Bill' Means for Your Utility Bills
If passed, the 'Big Beautiful Bill' could make home energy upgrades more expensive and raise monthly costs. Here's how much more you might pay and how to prepare.
-
Eight Estate Planning Steps to Protect Your Loved Ones (and Your Legacy)
Two-thirds of Americans don't have an estate plan. If you're one of them, these are the essential steps to take now to prevent problems for your family later.
-
The Six Pros This Adviser Says You Need to Sell Your Business
Selling your business isn't as simple as getting the best price and walking away. These are the six professionals you'll need to get a deal across the finish line.
-
The Three C's to Financial Success: A Financial Planner's Guide to Build Wealth
Consistency, commitment and confidence in your chosen strategy are more critical to your financial success than finding the 'perfect' financial plan.
-
A Financial Adviser's Guide to Solving Your Retirement Puzzle: Five Key Pieces
If retirement's a puzzle you're struggling with, try answering these five questions. The answers will guide you toward a solution.
-
You're Close to Retirement and Cashed Out: How Do You Get Back In?
If you've been scared into an all-cash position, it's wise to consider reinvesting your money in the markets. Here's how a financial planner recommends you can get back in the saddle.
-
After the Disaster: An Expert's Guide to Deciding Whether to Rebuild or Relocate
Homeowners hit by disaster must weigh the emotional desire to rebuild against the financial realities of insurance coverage, unexpected costs and future risk.
-
A Financial Expert's Tips for Lending Money to Family and Friends
What starts as a lifeline can turn into a minefield if the borrower ghosts the lender. Following these three steps can help you avoid family feuds over funds.
-
What the HECM? Combine It With a QLAC and See What Happens
Combining a reverse mortgage known as a HECM with a QLAC (qualifying longevity annuity contract) can provide longevity protection, tax savings and liquidity for unplanned expenses.