How to Write a Real Estate Proposal

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A proposal to lease a building suggests terms and conditions for a future agreement.
A proposal to lease a building suggests terms and conditions for a future agreement. (Image: Jupiterimages/Comstock/Getty Images)

Many real estate transactions require a written proposal as a precursor to execution of a contract. A proposal is not a legally binding agreement. However, it is advisable and customary to include a statement emphasizing this point within the proposal document. If you are thinking of a leasing a commercial building and want to find out what the landlord will and will not agree to do before a lease agreement is drawn up and signed, write a proposal that addresses the important issues.

Title the document "Proposal to Lease (enter the full subject property address)."

Wite as appropriate on the left side of the document such sub-headings (terms) such as: Lessee, Location, Floor Area, Use, Term, Rent Abatement, Rent, Rent Increases, Option to Extend, Option Rent, Lease Start Date, Initial Payment, Tax Pass-Through, Lessee Improvements, Lessor Improvements, Sublease, Access, Parking, Right of First Offer, Termination, Personal Guarantee and Commission.

Write in what you propose for each term. For example, Rent Abatement: Months one, two and three abated.

Write a sentence that establishes a deadline for a response and that non-compliance automatically terminates the proposal.

Write a sentence that states that the proposal is made in good faith but should not to be construed as a legally binding agreement.

Write a sentence that states the proposal is subject to securing all necessary permits and permissions from city and state regulatory authorities.

Talk with a real estate agent or attorney familiar with lease terminology to ensure that you understand the meaning of all terms before forwarding the proposal to the landlord. Pay particular attention to the manner in which you quote rent. In a multi-tenant building, be certain that you understand who pays for taxes, insurance and common area expenses, and that the proposal mirrors your intentions.

Tips & Warnings

  • Two common methods for quoting rent on commercial buildings are industrial gross, also known as industrial modified gross, and triple net. Industrial gross is used in multi-tenant buildings in which the landlord generally pays property taxes and building insurances but the tenant pays the utilities and other operating costs. Triple net usually requires each tenant in a building to pay a proportional share of the building's property taxes and insurances, common area utilities and common area maintenance charges. With triple net leases, tenants also pay operating costs and utilities for the specific location that they occupy.
  • If the proposal leads to preparation of a written lease agreement, consult with an experienced real estate agent or attorney familiar with leases before signing the lease.

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