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

LETTER OF INTENT FOR COMMERCIAL LEASE — MULTI-TENANT PROPERTY

STATE OF ARKANSAS

CONFIDENTIAL — FOR NEGOTIATION PURPOSES ONLY

Date: [__/__/____]

LOI Reference No.: [________________________________]

IMPORTANT NOTICE REGARDING NON-BINDING EFFECT: This Letter of Intent ("LOI") sets forth the principal business terms upon which the parties intend to negotiate a definitive Lease Agreement. Except for those provisions expressly identified as binding in Section 18 below, this LOI is not intended to create, and shall not be construed as creating, any legally binding or enforceable obligation on either party. Under Arkansas law, a lease for a term exceeding one (1) year must comply with the Statute of Frauds (A.C.A. § 4-59-102) and be reduced to a signed written agreement to be enforceable.

1. PARTIES

Landlord:

Tenant:

2. PREMISES AND BUILDING

Building Description:

• Building Name: [________________________________]
• Building Address: [________________________________], [____], Arkansas [____]
• County: [________________________________]
• Total Building Rentable Area: [________________________________] square feet
• Number of Stories: [____]
• Year Built / Last Renovated: [____] / [____]
• Building Class: ☐ A ☐ B ☐ C
• Property Type: ☐ Office ☐ Retail ☐ Mixed-Use ☐ Industrial ☐ Medical ☐ Other: [____]

Tenant's Premises:

• Suite / Unit Number(s): [________________________________]
• Rentable Square Feet (RSF): [________________________________]
• Usable Square Feet (USF): [________________________________]
• Load Factor / Loss Factor: [____]%
• Floor(s): [________________________________]
• Premises Location Description: [________________________________]

Measurement Standard:

• ☐ BOMA 2017 Office Standard (ANSI/BOMA Z65.1-2017)
• ☐ BOMA 2010 Retail Standard
• ☐ BOMA Industrial Standard
• ☐ Other: [________________________________]

Arkansas Note: The definitive Lease should specify measurement methodology. Arkansas courts generally enforce the measurement standard agreed upon by the parties. Confirm that the rentable area calculation and load factor are consistent with the standard applied to all tenants in the multi-tenant building.

3. LEASE TERM AND COMMENCEMENT

• Initial Term: [____] years [____] months
• Anticipated Commencement Date: [__/__/____]
• Rent Commencement Date: [__/__/____] or upon the occurrence of: ☐ Delivery of Premises ☐ Substantial Completion of Landlord's Work ☐ Certificate of Occupancy ☐ Other: [________________________________]
• Lease Expiration Date: [__/__/____] (subject to adjustment based on Commencement Date)
• Early Access / Fixturing Period: [____] days prior to Rent Commencement Date, rent-free, for Tenant's fixturing and move-in; Tenant shall carry insurance and comply with building rules during fixturing period.

4. DELIVERY OF PREMISES

• Delivery Condition:
• ☐ Warm Shell (HVAC to Premises, electrical stub, plumbing to core, fire-life safety to code)
• ☐ Cold Shell (base building structure only)
• ☐ As-Is
• ☐ Built-Out per approved plans

• ☐ Other: [________________________________]

• Target Delivery Date: [__/__/____]

• Outside Delivery Date: [__/__/____]

• Late Delivery Remedies:

• If Landlord fails to deliver the Premises by the Outside Delivery Date:
• ☐ Tenant receives one (1) day of free Base Rent for each day of delay beyond Outside Delivery Date
• ☐ Tenant receives [____] days of free Base Rent for each day of delay
• ☐ If delay exceeds [____] days beyond Outside Delivery Date, Tenant may terminate this LOI and the Lease (if executed) upon [____] days' written notice

• ☐ Other remedy: [________________________________]

• Force Majeure: Delivery delays caused by Tenant Delay, acts of God, governmental restrictions, labor disputes, material shortages, or other events beyond Landlord's reasonable control shall extend the Outside Delivery Date day-for-day, but shall not extend beyond [____] additional days.

5. RENT

5.1 Base Rent

• Rent Escalation Method: ☐ Fixed percentage ([____]%) ☐ Fixed dollar amount ($[____]/RSF) ☐ CPI (All Urban Consumers, South Region) ☐ Other: [________________________________]

5.2 Free Rent / Abatement

• Free Rent Period: [____] months of Base Rent abatement following Rent Commencement Date
• Abatement Conditions: ☐ Base Rent only ☐ Base Rent and Additional Rent ☐ Other: [________________________________]
• Recapture of Abated Rent upon Default: ☐ Yes ☐ No

5.3 Security Deposit

• Amount: $[________________________________] (equivalent to [____] months' Base Rent)
• Form: ☐ Cash ☐ Letter of Credit ☐ Other: [________________________________]
• Reduction Schedule: ☐ Reduced by [____]% after Year [____] if no uncured defaults ☐ No reduction ☐ Other: [________________________________]

6. ADDITIONAL RENT — CAM, TAXES, AND INSURANCE (MULTI-TENANT ALLOCATION)

6.1 Lease Structure

• ☐ Triple Net (NNN) — Tenant pays pro rata share of Operating Expenses, Real Estate Taxes, and Insurance
• ☐ Modified Gross — Landlord includes [________________________________] in Base Rent; Tenant pays increases over Base Year
• ☐ Full Service Gross — Landlord includes all Operating Expenses in Base Rent; Tenant pays increases over Base Year [____]
• ☐ Other: [________________________________]

6.2 Tenant's Pro Rata Share

• Tenant's RSF: [________________________________]
• Building RSF: [________________________________]
• Tenant's Pro Rata Share: [____]%
• Gross-Up Provision: Operating Expenses shall be "grossed up" to reflect [____]% occupancy (typically 95%) if actual occupancy is lower

6.3 Common Area Maintenance (CAM) Charges

• Estimated Year 1 CAM: $[____]/RSF
• CAM includes: property management fee (not to exceed [____]% of gross revenues), common area utilities, janitorial, landscaping, snow removal, security, trash removal, elevator maintenance, common area repairs
• CAM Exclusions (Tenant to negotiate): capital expenditures (except those amortized over useful life that reduce Operating Expenses), leasing commissions, Landlord's income taxes, depreciation, debt service, ground lease rent, costs of correcting latent defects, costs reimbursed by insurance, costs of tenant-specific improvements
• Controllable CAM Cap: ☐ [____]% per annum increase over prior year actuals ☐ [____]% cumulative cap ☐ No cap ☐ Other: [________________________________]

6.4 Real Estate Taxes

• Estimated Year 1 Taxes: $[____]/RSF
• Base Year for Tax Escalation: Calendar Year [____]

Arkansas Tax Note: Arkansas assesses commercial real property at 20% of appraised market value (A.C.A. § 26-26-303). Millage rates vary by county and school district. Tenants should request copies of the most recent assessment and verify the base year tax amount. Property taxes are assessed by the county assessor and collected by the county collector. In multi-tenant buildings, confirm that the building is assessed as a single parcel and that Tenant's pro rata allocation is fair and verifiable.

• Tax Protest Rights: Landlord shall ☐ use commercially reasonable efforts to protest any assessment increase exceeding [____]% ☐ consult with Tenant before filing or settling any tax appeal ☐ share costs and benefits of successful protests pro rata among tenants

6.5 Insurance

• Estimated Year 1 Insurance: $[____]/RSF
• Landlord shall maintain: commercial general liability, property/casualty (replacement cost), umbrella, and such other coverage as Landlord's lender requires
• Tenant shall maintain: commercial general liability ($[________________________________] per occurrence / $[________________________________] aggregate), property insurance for Tenant's personal property, business interruption, workers' compensation, and such other coverage as reasonably required

6.6 Annual Reconciliation and Audit Rights

• Landlord shall deliver annual Operating Expense reconciliation statements within [____] days following the end of each calendar year
• Tenant shall have the right to audit Landlord's books and records relating to Operating Expenses for a period of [____] months after receipt of each reconciliation statement
• If audit reveals overcharges exceeding [____]%, Landlord shall reimburse Tenant for the cost of the audit

7. TENANT IMPROVEMENTS

7.1 Tenant Improvement Allowance

• TI Allowance: $[____]/RSF (total: $[________________________________])
• Application: ☐ Hard construction costs only ☐ Hard and soft costs (architectural, engineering, permits) ☐ FF&E included ☐ Other: [________________________________]
• Unused TI Allowance: ☐ Forfeited ☐ Applied as rent credit ☐ Paid to Tenant in cash ☐ Other: [________________________________]
• Disbursement: ☐ Progress payments upon submission of invoices and lien waivers ☐ Lump sum upon substantial completion ☐ Other: [________________________________]

7.2 Landlord's Work

• Scope: [________________________________]
• Plans and Specifications: ☐ To be mutually agreed ☐ Per Exhibit [____] ☐ Per Building Standard
• Substantial Completion Deadline: [__/__/____]

7.3 Tenant's Work

• Tenant shall be responsible for all improvements beyond Landlord's Work and the TI Allowance
• Plans subject to Landlord's prior written approval (not to be unreasonably withheld, conditioned, or delayed)
• Tenant shall use ☐ Landlord's designated contractor(s) ☐ any licensed and insured contractor approved by Landlord
• All contractors must carry insurance and provide lien waivers

7.4 ADA and Code Compliance

• Landlord represents that the Building common areas and base Building systems comply with the Americans with Disabilities Act of 1990 (42 U.S.C. § 12101 et seq.) and all applicable local building codes as of the Delivery Date
• Tenant shall be responsible for ADA compliance within the Premises as part of Tenant's Work
• Allocation of costs for code-required upgrades triggered by Tenant's improvements: ☐ Landlord ☐ Tenant ☐ Shared: [________________________________]

8. USE, EXCLUSIVES, AND CO-TENANCY

8.1 Permitted Use

• Tenant's Permitted Use: [________________________________]
• Any use restrictions under zoning, CC&Rs, or existing tenant exclusives: [________________________________]

Arkansas Zoning Note: Confirm that the intended use complies with applicable municipal zoning ordinances. Arkansas municipalities derive zoning authority from A.C.A. § 14-56-401 et seq. (Planning and Zoning). Check for conditional use permits or special exceptions that may be required. Certain uses may also trigger additional environmental review under the Arkansas Department of Energy and Environment regulations.

8.2 Exclusive Use Provisions

• ☐ Tenant shall have an exclusive right to operate as [________________________________] within the Property
• ☐ Exclusive applies to: ☐ Entire Property ☐ Building only ☐ Shopping center/complex
• ☐ Exceptions to Exclusive: [________________________________]
• ☐ Remedies for violation of Exclusive: ☐ Rent reduction to [____]% of Base Rent ☐ Right to terminate ☐ Injunctive relief ☐ Other: [________________________________]
• ☐ No Exclusive Use provision

8.3 Co-Tenancy Requirements (Retail / Multi-Tenant)

• Opening Co-Tenancy: Tenant's obligation to open for business is conditioned upon:
• ☐ Anchor tenant(s) [________________________________] being open and operating
• ☐ At least [____]% of the Property RSF being occupied and open

• ☐ No co-tenancy requirement

• Ongoing Co-Tenancy: If co-tenancy conditions cease to be satisfied during the Term:

• ☐ Tenant may pay reduced rent of $[____]/RSF or [____]% of Base Rent
• ☐ If co-tenancy failure continues for [____] consecutive months, Tenant may terminate upon [____] days' notice
• ☐ No ongoing co-tenancy remedies

8.4 Tenant Mix and Compatibility

• Landlord represents that the following uses are ☐ prohibited ☐ restricted in the Property: [________________________________]
• Tenant acknowledges existing tenants and uses: [________________________________]

9. RENEWAL OPTIONS

• Number of Renewal Options: [____]
• Duration of Each Renewal: [____] years
• Renewal Rent:
• ☐ Fair Market Value (FMV), determined per Section 17
• ☐ Fixed escalation: [____]% above the last year's Base Rent
• ☐ Greater of FMV or [____]% increase
• ☐ CPI-adjusted
• ☐ Other: [________________________________]
• Notice Required: Tenant must provide written notice of intent to renew at least [____] months prior to the expiration of the then-current Term
• Conditions: No uncured Event of Default at time of exercise or commencement of renewal term

10. EXPANSION AND RIGHTS OF FIRST OFFER / REFUSAL

• Right of First Offer (ROFO): ☐ Yes — Landlord shall offer Tenant the opportunity to lease [________________________________] (the "Expansion Space") before offering it to third parties ☐ No
• Right of First Refusal (ROFR): ☐ Yes — If Landlord receives a bona fide third-party offer for the Expansion Space, Tenant shall have [____] business days to match such offer ☐ No
• Expansion Option: ☐ Yes — Tenant may expand into [________________________________] upon [____] months' notice at [________________________________] rent ☐ No
• Contraction Option: ☐ Yes — Tenant may reduce the Premises by [________________________________] RSF after Year [____] upon payment of a contraction fee equal to [________________________________] ☐ No

11. SIGNAGE

• ☐ Suite entry signage per Building standard
• ☐ Building directory listing
• ☐ Building exterior / monument signage: ☐ Exclusive ☐ Shared ☐ Not available
• ☐ Pylon signage (if applicable): [________________________________]
• All signage subject to Landlord's approval, Building sign criteria, and applicable municipal sign ordinances
• Landlord to provide and install Building-standard suite signage at Landlord's cost; non-standard signage at Tenant's cost

Arkansas Note: Sign permits may be required under local municipal ordinances. Check the applicable city or county sign code for size, illumination, and placement restrictions.

12. PARKING AND COMMON AREAS

12.1 Parking

• Parking Ratio: [____] spaces per 1,000 RSF
• Total Spaces Allocated to Tenant: [____]
• Reserved Spaces: [____] at $[____]/space/month
• Unreserved Spaces: [____] at $[____]/space/month (or ☐ included in rent)
• Location: [________________________________]

12.2 Common Areas

• Tenant shall have non-exclusive access to all common areas of the Building and Property, including lobbies, corridors, elevators, restrooms, loading docks, and shared conference facilities (if any)
• Landlord reserves the right to modify common areas provided that such modifications do not materially diminish Tenant's access to or use of the Premises
• Loading dock / freight elevator access: ☐ Shared ☐ Dedicated ☐ Not applicable

13. ASSIGNMENT AND SUBLETTING

• Landlord's consent required for any assignment or subletting (consent not to be unreasonably withheld, conditioned, or delayed)
• Permitted Transfers (no consent required): Transfers to an entity controlling, controlled by, or under common control with Tenant, or to a successor by merger, consolidation, or acquisition of substantially all of Tenant's assets, provided that the transferee has a net worth not less than [________________________________]
• Recapture Right: ☐ Landlord may recapture the Premises upon notice of proposed assignment/subletting ☐ No recapture right
• Profit Sharing: ☐ Landlord entitled to [____]% of subletting profits (after deducting Tenant's reasonable costs) ☐ No profit sharing

14. INSURANCE AND INDEMNIFICATION

• Landlord and Tenant shall maintain insurance coverages as specified in the definitive Lease
• Mutual indemnification for claims arising from each party's negligence or willful misconduct
• Waiver of Subrogation: Each party waives all rights of subrogation against the other for losses covered by insurance, regardless of fault
• Tenant to name Landlord (and Landlord's lender, if required) as additional insured on Tenant's liability policy

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

• Landlord shall deliver, at Landlord's cost, a commercially reasonable Subordination, Non-Disturbance, and Attornment Agreement from Landlord's lender(s) within [____] days of Lease execution
• SNDA shall provide that so long as Tenant is not in default under the Lease, Tenant's possession and rights under the Lease shall not be disturbed

16. BROKERS

• Landlord's Broker: [________________________________] (Arkansas License No. [________________________________])
• Tenant's Broker: [________________________________] (Arkansas License No. [________________________________])
• Commission: Per separate agreement between Landlord and Landlord's Broker; Landlord's Broker to cooperate with Tenant's Broker per industry practice

Arkansas Broker Note: Under A.C.A. § 17-42-101 et seq., all persons acting as real estate brokers in Arkansas must hold a valid license issued by the Arkansas Real Estate Commission. Broker commission agreements should be in writing. Under Arkansas regulation, a licensee may present an offer to lease regardless of whether the property is subject to an existing letter of intent.

• Each party represents that it has not dealt with any broker other than those named above and shall indemnify and hold the other party harmless from claims by any other broker claiming a commission through the indemnifying party.

17. FAIR MARKET VALUE DETERMINATION (IF APPLICABLE)

If any renewal or expansion rent is to be determined at Fair Market Value ("FMV"), the following procedure shall apply:

1. Negotiation: Landlord and Tenant shall negotiate in good faith for [____] days following Tenant's exercise of the applicable option.
2. Broker Determination: If the parties cannot agree, each shall appoint a licensed Arkansas commercial real estate broker with at least [____] years of experience in the [________________________________] market. Each broker shall independently determine FMV within [____] days. If the two determinations are within [____]% of each other, FMV shall be the average. If not, the two brokers shall appoint a third broker, who shall select one of the two original determinations (baseball arbitration).
3. FMV Definition: "Fair Market Value" means the rental rate for comparable space in comparable buildings in the [________________________________], Arkansas submarket, taking into account tenant improvement allowances, free rent, and other concessions, but excluding the value of Tenant-funded improvements and any goodwill attributable to Tenant's occupancy.

18. BINDING PROVISIONS

Notwithstanding the non-binding nature of this LOI, the following provisions shall be legally binding and enforceable upon execution of this LOI by both parties:

18.1 Exclusivity

From the date of mutual execution of this LOI through [__/__/____] (the "Exclusivity Period"), Landlord shall not market, show, negotiate, or enter into any lease or letter of intent with any other party for the Premises. If the definitive Lease is not executed by the expiration of the Exclusivity Period, the Exclusivity Period shall expire automatically unless extended by mutual written agreement.

18.2 Confidentiality

Each party shall keep the terms of this LOI and the negotiations relating to the proposed Lease confidential and shall not disclose them to any third party without the other party's prior written consent, except to such party's attorneys, accountants, lenders, brokers, and other professional advisors who have a need to know and who agree to maintain confidentiality.

18.3 Broker Indemnification

Each party's indemnification obligations with respect to brokerage claims as set forth in Section 16 shall be binding.

18.4 Governing Law and Venue

This LOI shall be governed by the laws of the State of Arkansas without regard to conflicts of law principles. Any dispute arising out of or relating to this LOI shall be subject to the exclusive jurisdiction of the state or federal courts located in [________________________________] County, Arkansas.

18.5 Expenses

Each party shall bear its own costs and expenses (including attorney's fees) incurred in connection with the negotiation of this LOI and the definitive Lease, regardless of whether the Lease is executed.

19. ENVIRONMENTAL MATTERS

• Landlord represents, to the best of Landlord's actual knowledge, that:
• ☐ No Hazardous Materials (as defined in the definitive Lease) are present on, under, or about the Premises or Building in violation of applicable Environmental Laws
• ☐ The Property has not been identified on any federal, state, or local list of contaminated sites

• ☐ There are no pending or threatened environmental claims, investigations, or remediation actions affecting the Property

• Landlord shall provide Tenant with copies of all existing Phase I and Phase II environmental site assessments within [____] business days of execution of this LOI

• Tenant shall have [____] business days to review environmental reports and raise objections

Arkansas Environmental Note: The Arkansas Department of Energy and Environment (formerly ADEQ) oversees environmental compliance. Commercial tenants should be aware of potential liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, 42 U.S.C. § 9601 et seq.) and the Arkansas Remedial Action Trust Fund Act (A.C.A. § 8-7-501 et seq.). Tenants occupying properties with known environmental conditions should negotiate appropriate indemnification, remediation cost allocation, and representations in the definitive Lease.

20. TIMELINE AND NEXT STEPS

21. ADDITIONAL TERMS AND CONDITIONS

• Holdover: Holdover rent shall be [____]% of the Base Rent in effect during the last month of the Term ([____]% is customary in Arkansas), plus Additional Rent.
• Default and Cure Periods: The definitive Lease shall contain customary default provisions with notice and cure periods of not less than [____] days for monetary defaults and [____] days for non-monetary defaults (subject to extension for defaults that cannot reasonably be cured within such period, provided Tenant diligently pursues cure).
• Landlord Default: If Landlord fails to perform its obligations under the Lease, Tenant shall provide written notice and Landlord shall have [____] days to cure (or such longer period as is reasonably necessary). Tenant shall have the right to self-help and offset for Landlord's uncured defaults after the expiration of all applicable cure periods.
• Casualty and Condemnation: Standard provisions for repair/restoration obligations and termination rights in the event of material casualty or condemnation affecting the Premises.
• Estoppel Certificates: Each party shall deliver estoppel certificates within [____] business days of request.
• Quiet Enjoyment: Landlord covenants that Tenant shall have quiet enjoyment of the Premises throughout the Term, subject to the terms of the Lease.

22. PRACTICE TIPS AND ARKANSAS-SPECIFIC NOTES

For Counsel:

1. Statute of Frauds: Under A.C.A. § 4-59-102, any lease for a term exceeding one year must be in writing and signed by the party to be charged. Ensure this LOI expressly states that it does not constitute such a lease and that all material terms are subject to the definitive Lease.

2. LOI Enforceability in Arkansas: Arkansas courts apply general contract principles to determine whether an LOI is binding. The key inquiry is whether the parties intended the LOI to be binding. Include clear language distinguishing binding from non-binding provisions. See Kilgore v. Verizon Directories Corp., 2012 Ark. App. 97.

3. Commercial Lease Eviction: A.C.A. § 18-17-912 provides specific eviction procedures for commercial leases. During eviction proceedings, the tenant must continue paying rent as it becomes due. Landlord must provide written receipts for rent payments.

4. Property Tax Assessment: Arkansas assesses commercial property at 20% of appraised market value. Millage rates vary significantly by county. Verify the current assessment and millage rate for the Property before finalizing tax pass-through provisions. The county assessor reassesses property annually.

5. Recording: Under A.C.A. § 18-12-601 et seq., a memorandum of lease may be recorded to provide constructive notice. Consider recording a memorandum of the definitive Lease (rather than the full Lease) to protect Tenant's leasehold interest.

6. Broker Licensing: Verify that all brokers hold valid licenses with the Arkansas Real Estate Commission under A.C.A. § 17-42-101 et seq. Unlicensed brokerage activity is a violation of Arkansas law and may render commission agreements unenforceable.

7. Multi-Tenant Specific: Carefully review CAM charge calculations, exclusions, caps, and audit rights. In multi-tenant settings, confirm the gross-up methodology, the treatment of vacant spaces, and whether management fees are calculated on gross or net revenues.

8. Environmental Due Diligence: Obtain and review Phase I ESA reports, particularly for properties with prior industrial or agricultural use. Arkansas's agricultural history means some commercial sites may have legacy pesticide or fertilizer contamination.

SIGNATURES

This Letter of Intent is executed as of the date first written above.

Except for the Binding Provisions in Section 18, this LOI is non-binding and is intended solely to facilitate negotiation of a definitive Lease Agreement.

LANDLORD:                                    TENANT:

Entity: _____________________________        Entity: _____________________________

By: _________________________________        By: _________________________________

Name: _______________________________        Name: _______________________________

Title: ______________________________        Title: ______________________________

Date: _______________________________        Date: _______________________________

EXHIBIT A — PREMISES FLOOR PLAN

[Attach floor plan showing the Premises highlighted within the Building, including common areas, corridors, and points of access]

EXHIBIT B — BUILDING SITE PLAN

[Attach site plan showing the Building, parking areas, common areas, and access points]

Sources and References

• Arkansas Code Annotated, Title 4, Subtitle 5, Chapter 59 — Statute of Frauds
• Arkansas Code Annotated, Title 18, Subtitle 2, Chapter 16 — Landlord and Tenant
• Arkansas Code Annotated, Title 18, Subtitle 2, Chapter 17, Subchapter 9, § 18-17-912 — Commercial Leases
• Arkansas Code Annotated, Title 17, Subtitle 2, Chapter 42 — Real Estate License Law
• Arkansas Code Annotated, Title 26, Subtitle 3, Chapter 26 — Property Tax Assessment
• BOMA International — Building Measurement Standards
• Americans with Disabilities Act, 42 U.S.C. § 12101 et seq.
• CERCLA, 42 U.S.C. § 9601 et seq.
• Arkansas Remedial Action Trust Fund Act, A.C.A. § 8-7-501 et seq.