Commercial Lease Letter of Intent (Multi-Tenant) - Alabama

LETTER OF INTENT -- MULTI-TENANT COMMERCIAL LEASE (ALABAMA)

CONFIDENTIAL -- FOR SETTLEMENT AND NEGOTIATION PURPOSES ONLY

Date: [__/__/____]

Delivered via: ☐ Email ☐ Hand Delivery ☐ Certified Mail ☐ Overnight Courier

RECITALS AND PURPOSE

This Letter of Intent ("LOI") sets forth the principal terms upon which [________________________________] ("Landlord") and [________________________________] ("Tenant") propose to enter into a definitive commercial lease agreement (the "Lease") for space within a multi-tenant property located in the State of Alabama. Except for the Binding Provisions identified in Section 20 below, this LOI is intended to be non-binding and shall not constitute or create any legally binding obligation on either party.

Alabama Practice Note: Alabama strongly adheres to freedom of contract principles. Commercial leases are not governed by the Alabama Uniform Residential Landlord and Tenant Act (Ala. Code § 35-9A-101 et seq.), which applies solely to residential tenancies. Commercial lease terms are negotiated and enforced under common law contract principles, with courts generally honoring the bargained-for terms of competent parties. Under Ala. Code § 35-4-20 (Statute of Frauds), any lease for a term exceeding one year must be in writing and signed by the party to be charged.

LOI Enforceability Note: Alabama courts evaluate the enforceability of LOIs based on the parties' intent, the specificity of terms, and whether the document manifests a present intent to be bound. An LOI that leaves material terms open and expressly disclaims binding effect will generally not be treated as a binding contract. However, binding carve-out provisions will be enforced according to their terms.

1. PARTIES

Landlord:

• Legal Name: [________________________________]
• Entity Type: [________________________________]
• State of Organization: [________________________________]
• Principal Address: [________________________________]
• Contact Person: [________________________________]
• Email: [________________________________]
• Phone: [________________________________]

Tenant:

• Legal Name: [________________________________]
• Entity Type: [________________________________]
• State of Organization: [________________________________]
• Principal Address: [________________________________]
• Contact Person: [________________________________]
• Email: [________________________________]
• Phone: [________________________________]

2. PREMISES AND BUILDING DESCRIPTION

Building:

• Building Name: [________________________________]
• Building Address: [________________________________]
• City/County: [________________________________], Alabama
• Building Type: ☐ Office ☐ Retail ☐ Mixed-Use ☐ Industrial ☐ Medical ☐ Other: [____]
• Total Building Rentable Area: [________________________________] RSF
• Number of Tenants in Building: [____]
• Year Built / Last Renovated: [____] / [____]

Premises:

• Suite / Unit Number(s): [________________________________]
• Approximate Rentable Square Footage: [________________________________] RSF
• Approximate Usable Square Footage: [________________________________] USF
• Floor(s): [________________________________]
• Load Factor / R/U Ratio: [____]%
• Current Condition: ☐ Shell ☐ Second-Generation Space ☐ Built-Out ☐ Other: [____]

Measurement Standard:

• ☐ BOMA 2017 (Office) ☐ BOMA 2010 (Retail) ☐ Other: [________________________________]
• Landlord to provide measurement documentation or permit Tenant verification prior to Lease execution.

3. LEASE TERM AND COMMENCEMENT

• Initial Term: [____] years [____] months
• Anticipated Commencement Date: [__/__/____]
• Rent Commencement Date: The earlier of: (a) [____] days after the Commencement Date; or (b) the date Tenant opens for business.
• Expiration Date: [__/__/____]
• Early Access / Fixturing Period: [____] days prior to the Commencement Date for fixturing and move-in at no charge for Base Rent (Tenant responsible for utilities and insurance during fixturing).

Alabama Statute of Frauds: Under Ala. Code § 35-4-20, any lease for a term exceeding one year must be memorialized in a signed written agreement. An LOI alone will not satisfy this requirement for the substantive lease terms.

4. DELIVERY AND LATE DELIVERY REMEDIES

• Delivery Condition: ☐ Warm Shell ☐ Cold Dark Shell ☐ As-Is ☐ Landlord Work Complete ☐ Other: [____]
• Target Delivery Date: [__/__/____]
• Outside Delivery Date: [__/__/____]
• Late Delivery Abatement: If Landlord fails to deliver the Premises by the Outside Delivery Date, Tenant shall receive one (1) day of free Base Rent for each day of delay.
• Extended Delay Termination Right: If delivery is delayed more than [____] days beyond the Outside Delivery Date, Tenant may terminate by written notice. Landlord shall return all deposits and reimburse Tenant's documented out-of-pocket costs up to $[________________________________].
• Severe Weather / Force Majeure Extension: The Outside Delivery Date shall be extended day-for-day for delays caused by tornado, hurricane, severe weather, or other force majeure events (see Section 23).

5. BASE RENT AND ESCALATIONS

• Annual Escalation: ☐ Fixed at [____]% per annum ☐ CPI-based (capped at [____]%) ☐ Fair Market Value adjustment at Year [____] ☐ Other: [________________________________]
• Free Rent / Abatement Period: [____] months of Base Rent abatement following the Commencement Date (Tenant remains responsible for Additional Rent during abatement).

6. ADDITIONAL RENT -- CAM, TAXES, AND INSURANCE

Lease Structure:
☐ Modified Gross ☐ Full Service Gross ☐ Triple Net (NNN) ☐ Other: [________________________________]

Base Year / Base Stop:

• Base Year for Operating Expenses: Calendar year [____]
• Base Year for Real Property Taxes: Tax year [____]-[____]
• Tenant's Proportionate Share: [____]% (based on [____] RSF / [____] RSF total building)

Estimated Year 1 Additional Rent:

• Operating Expenses (CAM): $[____]/RSF/year
• Real Property Taxes: $[____]/RSF/year
• Insurance: $[____]/RSF/year
• Total Estimated Additional Rent: $[____]/RSF/year

CAM Provisions (Multi-Tenant Specific):

(a) Controllable Expense Cap: Annual increases in Controllable Operating Expenses shall not exceed [____]% per annum on a cumulative/non-cumulative basis. Controllable Expenses exclude: real property taxes, insurance, utilities, and government-mandated costs.

(b) Gross-Up: If the Building is less than [____]% occupied, Operating Expenses shall be grossed-up to reflect [____]% occupancy. Landlord shall not recover more than actual expenses.

(c) Exclusions from CAM:

• Capital expenditures (except those mandated by law after Commencement Date or reducing operating costs, amortized over useful life at [____]% interest)
• Leasing commissions and tenant improvement costs for other tenants
• Costs of correcting latent construction defects
• Landlord's income, franchise, or transfer taxes
• Depreciation and debt service
• Costs reimbursed by insurance or warranties
• Management fees exceeding [____]% of gross revenues
• Fines, penalties, or interest charges
• Costs caused by Landlord's negligence or willful misconduct

(d) Audit Rights: Tenant may audit Landlord's Operating Expense records annually. If overcharges exceed [____]%, Landlord reimburses Tenant's reasonable audit costs plus the overcharge with interest at [____]%.

Alabama Property Tax Note: Alabama property taxes are assessed at varying rates depending on property classification. Commercial real property (Class II) is assessed at 20% of fair market value. County and municipal millage rates vary. Unlike some states, Alabama does not have a reassessment-upon-sale mechanism comparable to California's Proposition 13, though periodic reappraisals occur. The parties should define the Base Year and confirm the current assessment and millage rates for the Property. Local jurisdictions may impose special assessments for infrastructure improvements.

7. TENANT IMPROVEMENT ALLOWANCE AND LANDLORD WORK

Tenant Improvement Allowance ("TIA"):

• Amount: $[____] per RSF (total: approximately $[________________________________])
• Disbursement: ☐ Lump sum upon completion ☐ Progress payments ☐ Rent credit ☐ Other: [____]
• Unused TIA: ☐ Forfeited ☐ Applied as rent credit up to [____]% ☐ Cash payment to Tenant up to [____]%
• TIA Expiration: Must be utilized within [____] months of the Commencement Date

Landlord Work:

• Scope: [________________________________]
• Plans and Specifications: To be mutually agreed within [____] days of LOI execution
• Completion Deadline: [__/__/____]

Code Compliance Allocation:

Alabama Building Code Note: Alabama has adopted the International Building Code (IBC) as amended by the Alabama Building Commission. Local municipalities may impose additional requirements. Building permits are required for tenant improvements, and contractors must be licensed under the Alabama General Contractors Licensing Act (Ala. Code § 34-8-1 et seq.) for projects exceeding $50,000.

8. PERMITTED USE, EXCLUSIVE USE, AND CO-TENANCY

Permitted Use:

• Primary Use: [________________________________]
• Ancillary Uses: [________________________________]
• Prohibited Uses: [________________________________]
• Use must comply with applicable zoning, CC&Rs, and all applicable laws

Exclusive Use Provision (Multi-Tenant Specific):

• Tenant shall have the exclusive right within the Building/Project to operate as a [________________________________].
• Exclusivity shall not apply to: (i) tenants in occupancy as of the Lease date whose existing use conflicts; (ii) uses ancillary to another tenant's primary use constituting less than [____]% of gross revenue; (iii) [________________________________].
• Remedies for Violation: ☐ Reduced rent to [____]% ☐ Right to terminate ☐ Injunctive relief ☐ Combination: [________________________________]

Co-Tenancy Provision (Multi-Tenant / Retail):

(a) Opening Co-Tenancy: Tenant's obligation to open is conditioned upon:

• [________________________________] ("Anchor Tenant") open and operating in at least [____] RSF
• At least [____]% of Building/Project RSF leased and occupied
• Failure Remedy: If not satisfied by [__/__/____], Tenant may: ☐ delay opening ☐ pay reduced rent of $[____]/month ☐ terminate

(b) Ongoing Co-Tenancy: If during the Term:

• Anchor Tenant ceases operations for more than [____] consecutive days
• Overall occupancy falls below [____]%
• Failure Remedy: ☐ Reduced rent of [____]% of Base Rent ☐ Terminate after [____] days' notice ☐ Both

Tenant Mix Restrictions:

• Landlord shall not lease to the following categories without Tenant's prior consent: [________________________________]
• Prohibited uses in the Building/Project: [________________________________]

Radius Restriction (Retail):

• ☐ Not applicable ☐ Tenant shall not operate a competing business within [____] miles for the Term and [____] months after

Go-Dark:

• ☐ Tenant must remain open during customary business hours
• ☐ Tenant may go dark upon [____] days' notice, continuing to pay Rent
• ☐ Landlord recapture right after [____] consecutive days of closure

9. RENEWAL OPTIONS

• Number of Options: [____] renewal option(s) of [____] years each
• Notice Period: Written notice no later than [____] months prior to expiration
• Renewal Rent: ☐ FMV ☐ Fixed at $[____]/RSF ☐ [____]% increase ☐ Greater of FMV or [____]% increase

FMV Determination (if applicable):

1. Parties attempt to agree within [____] days of exercise.
2. If unable, each appoints a licensed MAI appraiser within [____] days.
3. If appraisals within [____]%, FMV = average.
4. If not, third appraiser selected; baseball arbitration applies.
5. FMV excludes Tenant's improvements, goodwill, and going-concern value.

10. EXPANSION RIGHTS AND RIGHTS OF FIRST OFFER / REFUSAL

Right of First Offer ("ROFO"):

• ☐ Tenant has ROFO on Suite(s) [________________________________]
• Landlord must offer to Tenant before marketing to third parties
• Tenant has [____] business days to accept
• ROFO subordinate to existing rights of: [________________________________]

Right of First Refusal ("ROFR"):

• ☐ Tenant has ROFR on [________________________________]
• Tenant has [____] business days to match any bona fide third-party offer

Expansion Option:

• ☐ Option to expand into [________________________________] at $[____]/RSF or FMV upon [____] months' notice

11. SIGNAGE

• ☐ Suite entry signage per Building standard
• ☐ Building directory listing
• ☐ Building-top or monument signage (subject to availability and municipal approval)
• ☐ Specifications: [________________________________]
• All signage subject to Landlord's reasonable approval, applicable municipal sign ordinances, and CC&Rs.
• Existing exclusive signage rights: [________________________________]

12. PARKING

• Allocated Spaces: [____] spaces per 1,000 RSF = [____] total spaces
• Type: ☐ Unreserved ☐ Reserved ☐ Covered ☐ Surface
• Monthly Charge: $[____] per unreserved; $[____] per reserved
• Parking subject to local zoning ordinances and ADA accessibility requirements

13. ASSIGNMENT AND SUBLETTING

• Landlord's consent required, not to be unreasonably withheld, conditioned, or delayed.
• Permitted Transfers: To affiliates, successors by merger/consolidation, or purchasers of substantially all assets, provided successor has tangible net worth of at least $[________________________________].
• Profit Sharing: Landlord entitled to [____]% of subletting/assignment profit after Tenant's costs.
• Recapture Right: ☐ Yes ☐ No

14. INSURANCE AND INDEMNITY

Tenant Insurance Requirements:

• Commercial General Liability: $[________________________________] per occurrence / $[________________________________] aggregate
• Property Insurance: Full replacement cost of Tenant's property and improvements
• Workers' Compensation: Statutory limits
• Business Interruption: [____] months
• Additional: ☐ Umbrella ☐ Flood (if in flood zone) ☐ Windstorm/Tornado (see below)

Mutual Provisions:

• Mutual waiver of subrogation
• Landlord named as additional insured on Tenant's CGL policy
• Mutual indemnification for negligence or willful misconduct

Alabama Severe Weather Insurance Note: Alabama is in the heart of "Tornado Alley" and is subject to severe weather events, including tornadoes, hurricanes (coastal areas), and severe thunderstorms. Parties should address: (i) whether windstorm/tornado insurance is required as a separate policy or rider (standard property policies may exclude or sublimit windstorm in certain areas); (ii) allocation of deductibles for named storms; (iii) business interruption coverage triggered by severe weather events; and (iv) whether the Lease requires Landlord to maintain a tornado-safe room or shelter for the Building.

15. ENVIRONMENTAL

Landlord Environmental Representations:

• Landlord represents that, to Landlord's actual knowledge: (i) the Property is free from Hazardous Materials contamination in violation of Environmental Laws; (ii) no underground storage tanks exist on the Property; (iii) the Property is not on any federal or state environmental cleanup list.

Environmental Due Diligence:

• ☐ Tenant to conduct Phase I ESA at Tenant's cost
• ☐ Landlord to provide existing environmental reports
• ☐ Environmental condition satisfactory to Tenant is a condition of the Lease

Ongoing Obligations:

• Tenant shall not use, store, or dispose of Hazardous Materials except in compliance with law and in quantities customary for Tenant's use.
• Mutual indemnification: Tenant for Tenant-caused contamination; Landlord for pre-existing contamination.

Alabama Environmental Note: Alabama's environmental regulatory authority is the Alabama Department of Environmental Management (ADEM). ADEM administers state environmental programs including those delegated under federal law. The Alabama Underground Storage Tank Trust Fund (Ala. Code § 22-36-1 et seq.) addresses cleanup of petroleum releases from USTs. For commercial properties with industrial history, Phase I Environmental Site Assessments per ASTM E1527-21 are recommended.

16. CASUALTY AND CONDEMNATION

Casualty:

• If the Premises cannot be restored within [____] days, either party may terminate.
• If [____]% or more of the Building RSF is unusable, either party may terminate.
• Rent abates proportionally during restoration.

Condemnation:

• If all or a material portion is taken by eminent domain, either party may terminate.
• Tenant entitled to separate claim for relocation costs, loss of business, and unamortized Tenant improvements.

Alabama Severe Weather / Casualty Note: Given Alabama's exposure to tornadoes and severe storms, the casualty provisions should specifically address: (i) restoration timelines in the event of widespread regional damage that may delay contractor availability and material supplies; (ii) whether force majeure extensions apply to the restoration period; (iii) abatement of rent if the Premises are habitable but inaccessible due to surrounding damage or road closures; and (iv) Tenant's right to terminate if the Building is not restored to current building code standards (which may differ from pre-casualty standards if codes were updated after original construction).

17. SUBORDINATION, NON-DISTURBANCE, AND ATTORNMENT (SNDA)

• Landlord shall deliver SNDA from each existing and future lender within [____] days of Lease execution.
• SNDA shall protect Tenant's possession so long as Tenant is not in default.
• Estoppel certificates within [____] business days of request.

18. SECURITY DEPOSIT

• Amount: $[________________________________] (equivalent to [____] months' estimated total Rent)
• Form: ☐ Cash ☐ Letter of Credit ☐ Other: [________________________________]
• Reduction: May be reduced to $[________________________________] after Year [____] if no default

Alabama Security Deposit Note: Alabama does not have a specific statutory framework governing commercial security deposits (the residential statute, Ala. Code § 35-9A-201, applies only to residential tenancies). Commercial deposit terms are governed entirely by the Lease agreement under freedom of contract principles. The Lease should clearly specify: (i) permitted uses of the deposit; (ii) return timeline; (iii) itemization requirements upon retention; and (iv) whether interest accrues.

19. BROKERS

• Landlord's Broker: [________________________________]
• Tenant's Broker: [________________________________]
• Commissions payable by Landlord per separate agreement.
• Each party represents no other broker is involved and indemnifies the other.

20. BINDING PROVISIONS

The following provisions are binding upon execution:

(a) Exclusivity: Through [__/__/____], Landlord shall not market, negotiate, or lease the Premises to any third party.

(b) Confidentiality: Terms of this LOI and negotiations shall be confidential, except for disclosures to attorneys, accountants, lenders, and bona fide advisors.

(c) Broker Indemnification: Section 19 mutual indemnification is binding.

(d) Governing Law and Venue: This LOI shall be governed by the laws of the State of Alabama. Disputes regarding the Binding Provisions shall be resolved in the state or federal courts located in [________________________________] County, Alabama.

(e) Expenses: Each party bears its own costs.

(f) No Agreement to Negotiate: This LOI does not constitute an agreement to negotiate or an agreement to agree. No party has any obligation to continue negotiations or to enter into a definitive Lease.

Alabama Practice Note: Alabama courts enforce freedom of contract and generally uphold non-binding LOI disclaimers. As the Alabama Supreme Court has affirmed, contracts between competent parties, voluntarily and fairly made, are valid and enforceable. The binding carve-outs above will be enforced according to their terms. Unlike California, Alabama does not recognize a common law duty to negotiate in good faith in the LOI context absent an express agreement to do so.

21. LEASE NEGOTIATION TIMELINE

22. ADDITIONAL ALABAMA-SPECIFIC PROVISIONS

(a) Severe Weather Preparedness: The Lease shall address severe weather preparedness, including: (i) Landlord's obligation to maintain the Building in compliance with current wind-load and storm-resistance standards under the Alabama Building Code; (ii) availability of tornado shelter or safe room within the Building; (iii) Landlord's obligation to maintain an emergency preparedness plan; and (iv) communication protocols during severe weather events.

(b) Alabama Business Privilege Tax: Tenant should be aware that Alabama imposes a Business Privilege Tax (Ala. Code § 40-14A-21 et seq.) on entities doing business in Alabama. The Lease should clarify that this is not a property-related tax and is not includable in Operating Expense pass-throughs.

(c) Contractor Licensing: All construction work on tenant improvements exceeding $50,000 must be performed by contractors licensed under the Alabama General Contractors Licensing Act (Ala. Code § 34-8-1 et seq.).

(d) Lien Waivers: Alabama recognizes mechanics' and materialmen's liens (Ala. Code § 35-11-210 et seq.). The Lease should require Tenant to obtain lien waivers from all contractors and subcontractors performing work on the Premises and should address Landlord's right to post notice of non-responsibility.

(e) Recording: Alabama law permits recording of a memorandum of lease in the Probate Court of the county where the property is located (Ala. Code § 35-4-23). Parties should address whether a memorandum of lease will be recorded to provide constructive notice to third parties.

23. FORCE MAJEURE

For purposes of the Binding Provisions and any delivery or construction deadlines, neither party shall be liable for delays resulting from acts of God, tornado, hurricane, severe weather, fire, flood, pandemic, government orders, strikes, material shortages, or other causes beyond reasonable control, provided the affected party gives prompt written notice and uses commercially reasonable efforts to mitigate.

Alabama Severe Weather Force Majeure Note: Alabama's exposure to tornadoes and severe storms makes force majeure provisions particularly important. Under Alabama law, the force majeure event must directly impact the obligated party's ability to perform. A tornado in another part of the state does not excuse performance if the subject property is unaffected. Force majeure clauses should specifically enumerate severe weather events and define the geographic scope of qualifying events.

24. COUNTERPARTS AND ELECTRONIC SIGNATURES

This LOI may be executed in counterparts. Electronic signatures are valid under the Alabama Uniform Electronic Transactions Act (Ala. Code § 8-1A-1 et seq.).

PRACTICE TIPS FOR ALABAMA MULTI-TENANT COMMERCIAL LEASE LOI

1. Freedom of Contract: Alabama strongly favors freedom of contract in commercial leasing. Unlike residential leases, there are few mandatory statutory protections for commercial tenants. All protections must be negotiated and included in the Lease.

2. Statute of Frauds: Leases exceeding one year must be in writing (Ala. Code § 35-4-20). Ensure the definitive Lease is properly executed by authorized signatories.

3. Severe Weather Planning: Alabama ranks among the highest-risk states for tornado damage. Address tornado shelter availability, insurance requirements (including windstorm/named storm coverage), and restoration timelines in the Lease.

4. CAM Audit Rights: As in all multi-tenant leases, negotiate robust audit rights with clear exclusions and a controllable expense cap.

5. Property Tax Assessment: Alabama assesses commercial property at 20% of fair market value (Class II). Confirm the current assessment, millage rates, and any pending reassessment with the county tax assessor.

6. Security Deposit Protections: Because Alabama has no commercial security deposit statute, all deposit terms must be contractually specified. Consider including: itemization of permitted deductions, return timeline (e.g., 30-60 days), and interest provisions.

7. Mechanics' Liens: Alabama's mechanics' lien statute (Ala. Code § 35-11-210 et seq.) can encumber the property for unpaid tenant improvement work. Landlords should require lien waivers; tenants should ensure subcontractor payment provisions protect their interests.

8. SNDA Protections: Always require SNDA from Landlord's lenders. Alabama follows general common law regarding lease subordination, and without an SNDA, foreclosure could terminate the Lease.

9. Environmental Due Diligence: For properties with industrial or manufacturing history (common in Birmingham and other Alabama industrial cities), conduct Phase I ESA before committing to the Lease.

10. Insurance Coverage Gaps: Standard commercial property policies may exclude or sublimit windstorm/tornado damage in certain Alabama counties. Confirm that Landlord's property insurance provides adequate windstorm coverage and that deductible obligations are clearly allocated.

SIGNATURES

This LOI is non-binding except for the Binding Provisions in Section 20.

LANDLORD:                                    TENANT:

Entity: ______________________________      Entity: ______________________________

By: __________________________________      By: __________________________________

Name: ________________________________      Name: ________________________________

Title: _______________________________      Title: _______________________________

Date: [__/__/____]                           Date: [__/__/____]

SOURCES AND REFERENCES

• Ala. Code Title 35 -- Property
• Ala. Code § 35-9A-101 et seq. -- Uniform Residential Landlord and Tenant Act
• Ala. Code § 35-4-20 -- Statute of Frauds (Leases)
• Ala. Code § 35-11-210 et seq. -- Mechanics' and Materialmen's Liens
• Ala. Code Title 7, Art. 2A -- UCC Leases
• Ala. Code § 8-1A-1 et seq. -- Alabama Uniform Electronic Transactions Act
• Dentons Q&A: Real Estate Leasing -- Alabama