How to Write a Rental Space Proposal

A well-written and researched rental space proposal helps future negotiations.

A well-written rental space proposal could prevent hours of pointless negotiations with a party who cannot make up his mind. Rental space proposals, also known as letters of intent, are documents that lay out the basic terms of a rental transaction. If one party later disputes an issue, the initial terms of the rental space proposal are a written reminder of their intent. Writing effective rental space proposals requires researching your needs, determining the market value of the property and outlining monetary and use terms.

Instructions

1. Begin your proposal with the property description, including the building and suite number, if applicable. List the names, addresses and contact numbers of the landlord and prospective tenant and also the contact information of any brokers or real estate agents.

2. State the intended use of the space. Be specific without limiting the use. The prospective tenant wants to be sure that her use is authorized while the landlord needs to ensure that the intended use is appropriate for the type of space. For example, a store selling guns would be inappropriate in an office building. (See References 2)

3. Explain how monthly and additional rent is to be handled. Additional rent typically entails costs for utilities, common area expenses, insurance and consumer price index increases. Carefully consider additional rent costs as they add up very quickly. Consider whether additional rent will be paid as part of a gross lease, meaning that additional rent is included in monthly rent; or a net lease, meaning that additional rent is added on top of monthly rent.

4. List the length of term, including the anticipated move-in date. Commercial leases are often listed in months, not years. Also list any additional items of importance, such as parking, security deposit, assignment and subletting rights, signage, renewal options and terms and the rights of the landlord and tenant to expand or downsize the property. (See References 1)

5. List the terms for vacating the lease. Include days of notice required before vacating the premises; also include which improvements or fixtures to the space the tenant can remove and which improvements or fixtures stay with the space. List the amount of "holdover rent," if any, that will be assessed on top of the monthly rent if the tenant does not move out in time. List under what circumstances the renter can break the lease. For example, in commercial leases, rentors often state that they can terminate the lease if they do not meet predefined sales amounts.

Tips & Warnings

• Renters should consider the size of the intended space to be rented and how the common areas are adjusted between all tenants. In commercial leases, landlords typically divide the common areas up between the tenants in a particular building and charge each tenant accordingly for their share of the common area expenses.

• Be careful not to confuse the lease commencement date with the rent commencement date. Both dates should be clarified in the proposal, if possible. Many leases allow tenants an allowance for improvements to make the space suitable for the tenant's needs, with the lease term beginning to run when tenant improvements begin but with actual rent commencing after completion of tenant improvements.

References

• Real Estate Center at Texas A & M University; Commercial Letters of Intent; Reid C. Wilson; July 2003
• Realty Times; A Handy Guide to Understanding Lease Proposals; Clifford A. Hockley; August 13, 2003
• NAI James E. Hanson; Letter of Intent (Offer) to Lease Commercial Property; Darren M. Lizzack; January 10, 2010
• "Essentials of Practical Real Estate Law, Third Edition;" Daniel F. Hinkel; 2004

Resources

• Idaho Department of Administration: Lease Proposal Form