Commercial Lease Letter of Intent (Single-Tenant) - Alaska

LETTER OF INTENT -- SINGLE-TENANT COMMERCIAL LEASE (ALASKA)

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 the entirety of the property described below on a single-tenant basis. Except for the Binding Provisions in Section 22, this LOI is non-binding and shall not create any legally binding obligation on either party.

Alaska Practice Note: Alaska commercial leases are governed by common law contract principles and freedom of contract. The Alaska Uniform Residential Landlord and Tenant Act (AS 34.03) applies only to residential tenancies and expressly excludes commercial property. Under AS 09.25.010, leases of real property that cannot be performed within one year must be in writing.

Alaska-Specific Challenges: Single-tenant commercial leasing in Alaska presents unique considerations: extreme weather (temperatures below -40degF in interior regions), seismic activity (most seismically active U.S. state), permafrost conditions, limited construction season (generally May-September), supply chain constraints, higher construction and maintenance costs, and in some areas, limited infrastructure. This LOI includes specialized provisions for these conditions.

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 DESCRIPTION

Property:

• Property Address: [________________________________]
• Borough / Census Area: [________________________________], Alaska
• Property Type: ☐ Industrial / Warehouse ☐ Office ☐ Retail (Freestanding) ☐ Flex ☐ Medical ☐ Government Services ☐ Cold Storage ☐ Other: [____]
• Total Building Area: [________________________________] RSF
• Land Area: Approximately [________________________________] acres / SF
• Year Built / Last Renovated: [____] / [____]
• Clear Height (if warehouse/industrial): [____] feet
• Loading: [____] dock-high doors; [____] grade-level doors
• Power: [____] amps / [____] volts / [____] phase
• HVAC / Heating: ☐ Natural Gas ☐ Oil-Fired Boiler ☐ Electric ☐ Geothermal ☐ Wood/Pellet ☐ Other: [____]

Building Systems (Alaska-Specific):

• Insulation: R-[____] (walls); R-[____] (roof); R-[____] (floor/foundation)
• Foundation: ☐ Slab-on-Grade ☐ Piers/Pilings ☐ Spread Footing ☐ Thermosyphon (permafrost) ☐ Adjustable Jackscrew Piles ☐ Other: [____]
• Backup Power: ☐ Generator ([____] kW) ☐ Battery ☐ None
• Snow Load Rating: [____] PSF
• Seismic Design Category: [____]
• Water / Sewer: ☐ Municipal ☐ Well / Septic ☐ Hauled Water ☐ Other: [____]

Single-Tenant Specific:

• Tenant leases the entire Building and exclusive use of all surrounding land, parking, and improvements.
• ☐ Build-to-Suit (see Section 7)
• ☐ Existing Building

Measurement: ☐ BOMA 2017 ☐ BOMA 2010 ☐ Actual/As-Built ☐ Other: [____]

3. LEASE TERM AND COMMENCEMENT

• Initial Term: [____] years [____] months
• Anticipated Commencement Date: [__/__/____]
• Rent Commencement Date: ☐ Same as Commencement ☐ [____] days after Commencement ☐ Upon Substantial Completion ☐ Upon CO ☐ Other: [________________________________]
• Expiration Date: [__/__/____]
• Early Access / Fixturing: [____] days prior at no Base Rent (Tenant pays utilities and insurance)
• Seasonal Construction Acknowledgment: The parties acknowledge that construction timelines in Alaska are materially affected by weather, and delivery/fixturing schedules shall account for the limited construction season.

4. DELIVERY AND LATE DELIVERY REMEDIES

• Delivery Condition: ☐ Warm Shell ☐ Cold Dark Shell ☐ As-Is ☐ Turnkey / Build-to-Suit Complete ☐ Other: [____]
• Target Delivery Date: [__/__/____]
• Outside Delivery Date: [__/__/____]
• Late Delivery Abatement: One (1) day of free Base Rent per day of delay beyond Outside Delivery Date.
• Extended Delay Termination: If delivery does not occur within [____] days of Outside Delivery Date, Tenant may terminate. Landlord returns deposits and reimburses Tenant's documented costs up to $[________________________________].
• Alaska Weather / Supply Chain Extension: Outside Delivery Date extended day-for-day for: (i) extreme cold below -[____]degF preventing construction; (ii) seismic events; (iii) shipping/barge/transportation disruptions; (iv) material supply delays specific to Alaska logistics; (v) other force majeure.

Build-to-Suit Delivery Note: For build-to-suit construction in Alaska, delivery dates must account for: (i) limited construction season (concrete pours, site work, and exterior finishes generally restricted to May-September); (ii) material shipping lead times from the Lower 48 (2-6+ weeks by barge or truck via the Alaska Highway); (iii) limited local contractor availability; and (iv) permitting timelines that vary significantly between organized and unorganized boroughs.

5. BASE RENT AND ESCALATIONS

Lease Structure: ☐ Absolute NNN ☐ NNN ☐ Double Net (NN) ☐ Modified Gross ☐ Full Service Gross

• Annual Escalation: ☐ Fixed at [____]% ☐ CPI-based (Anchorage CPI-U, capped at [____]%) ☐ FMV reset at Year [____] ☐ Other: [________________________________]
• Free Rent: [____] months of Base Rent abatement

Alaska CPI Note: If using CPI escalations, specify the Anchorage CPI-U (Bureau of Labor Statistics). Alaska CPI trends may diverge from national figures due to oil prices, military spending, and other Alaska-specific economic factors.

6. ADDITIONAL RENT -- NNN CHARGES (SINGLE-TENANT SPECIFIC)

As the sole tenant, Tenant pays 100% of:

(a) Real Property Taxes:

• All borough/municipal property taxes, assessments, and governmental charges
• Estimated Year 1: $[____]/RSF

(b) Insurance:

• Property (full replacement cost), CGL, and required coverages
• Estimated Year 1: $[____]/RSF

(c) Heating and Utilities (Alaska-Specific):

• All heating fuel, electricity, water, sewer, and utility costs
• Estimated Year 1 Heating: $[____]/RSF
• Estimated Year 1 Electricity: $[____]/RSF
• Estimated Year 1 Water/Sewer: $[____]/RSF

(d) Property Maintenance and Repair:

• All costs per allocation in Section 8
• Snow removal, ice management, parking lot maintenance
• Estimated Year 1: $[____]/RSF

(e) Total Estimated NNN / Operating Charges (Year 1): $[____]/RSF

Alaska Property Tax Note: Alaska has no state-level property tax. Taxes are levied by boroughs and municipalities at varying millage rates. Properties in unorganized boroughs may have no property tax obligation. Key considerations: (i) confirm the taxing jurisdiction; (ii) identify current millage rates and any pending rate changes; (iii) determine whether any exemptions (senior, economic development, non-profit) apply; (iv) understand the borough's reappraisal cycle. Major taxing jurisdictions include: Municipality of Anchorage, Fairbanks North Star Borough, Matanuska-Susitna Borough, Kenai Peninsula Borough, City and Borough of Juneau, and Ketchikan Gateway Borough.

Alaska Heating Cost Critical Note: Heating is typically the single largest operating expense for Alaska commercial buildings, particularly in interior Alaska. Costs depend heavily on fuel type and region:
- Natural Gas (primarily Anchorage/Cook Inlet area): Most cost-effective; $3-6/RSF typical
- Heating Oil (#1 or #2 fuel oil, widespread): $8-15/RSF; subject to significant price volatility
- Electric Heat (Southeast Alaska with hydropower; expensive elsewhere): Varies widely
- Propane (rural areas): Often the most expensive option

In a single-tenant NNN lease, the tenant bears 100% of heating costs. Consider: (i) Landlord's warranty of heating system condition and efficiency; (ii) minimum insulation standards; (iii) Tenant's right to upgrade heating systems with a credit against rent; and (iv) contingency for fuel price spikes.

7. TENANT IMPROVEMENTS, BUILD-TO-SUIT, AND LANDLORD WORK

Option A: TIA (Existing Building)

• Amount: $[____] per RSF (total: $[________________________________])
• Disbursement: ☐ Lump sum ☐ Progress payments ☐ Rent credit
• Unused: ☐ Forfeited ☐ Rent credit [____]% ☐ Cash [____]%
• Utilized within [____] months

Option B: Build-to-Suit

• Landlord constructs per agreed plans; budget: $[________________________________]
• Design: Space plan within [____] days of LOI; construction drawings within [____] days
• Construction: Commence within [____] days of permit; substantial completion within [____] months
• Seasonal Adjustment: Construction timeline assumes [____] construction seasons (May-September); if permits are not issued by [__/__/____], delivery date extends to the next construction season
• Cost Overruns: ☐ Landlord ☐ Tenant above $[____] ☐ Shared
• Change Orders: Tenant cost; estimates within [____] business days
• Alaska Construction Premium: Parties acknowledge that construction costs in Alaska typically exceed Lower 48 costs by [____]-[____]% due to material shipping, labor availability, and climate-related factors

Code Compliance:

Alaska Building Code Note: Alaska does not have a mandatory statewide building code for all areas. The Municipality of Anchorage adopts the IBC with Alaska-specific seismic and energy amendments. Other organized boroughs may have their own adopted codes. Many rural and unorganized borough areas have no building code at all. For build-to-suit construction, the parties should: (i) identify the applicable code jurisdiction; (ii) agree on a construction standard (even in areas without mandatory codes, prudent practice is to build to IBC standards adapted for Alaska conditions); and (iii) address seismic design category requirements per ASCE 7.

Permafrost Construction: In permafrost areas, construction must account for: (i) foundation design that prevents thaw of underlying permafrost (e.g., thermosyphon systems, ventilated crawlspaces, adjustable jackscrew piles); (ii) thermal barriers; (iii) gravel pad requirements; and (iv) long-term settlement monitoring. The cost premium for permafrost-appropriate construction can be 20-50% above non-permafrost construction.

8. MAINTENANCE, REPAIR, AND STRUCTURAL RESPONSIBILITIES

Single-Tenant Allocation:

• Capital Expenditure Threshold: $[________________________________]; borne by ☐ Landlord ☐ Tenant ☐ Shared
• Roof and Structural Warranty: [____] years from Commencement / build-to-suit completion
• Heating System Warranty: Landlord warrants heating system in good working order for [____] years

Alaska Maintenance Considerations: Single-tenant properties in Alaska require heightened maintenance attention due to extreme conditions:
- Pipe Freeze Prevention: Heat trace on exposed water lines, insulation, and winterization protocols are essential. A single pipe freeze event can cause catastrophic damage.
- Snow Load Management: Roofs must be designed for local snow loads (40-100+ PSF in some areas). Tenant or Landlord must have a snow removal plan for the roof if accumulation exceeds design load.
- Ice Dam Prevention: Proper insulation and ventilation are critical. Address ice dam responsibility and remediation.
- Heating System Failure: A heating system failure in winter can cause building-wide pipe freezing within hours. Require backup heating capability or emergency response protocols.
- Foundation Monitoring (Permafrost): Annual monitoring of settlement, thermosyphon function, and ground temperatures is recommended.

9. PERMITTED USE

• Primary Use: [________________________________]
• Ancillary Uses: [________________________________]
• Prohibited Uses: [________________________________]
• Zoning: Current designation: [________________________________]; Tenant's use ☐ is ☐ is not permitted by right
• Entitlements Required: ☐ None ☐ Conditional Use Permit ☐ Variance ☐ Other: [________________________________]
• Note: In unorganized borough areas, there may be no local zoning. State land use requirements may still apply.

10. PURCHASE OPTION (SINGLE-TENANT SPECIFIC)

☐ Not Applicable

☐ Purchase Option:

• Exercise Window: After Year [____], upon [____] months' written notice
• Price: ☐ FMV ☐ Fixed at $[________________________________] ☐ Formula: [________________________________]
• FMV: MAI appraisal per Section 11 process (appraiser must have Alaska experience)
• Due Diligence: [____] days
• Closing: [____] days after due diligence
• Lease terminates at closing
• Credit for unamortized Tenant-funded improvements

☐ ROFR to Purchase:

• [____] business days to match third-party offer

Alaska Practice Note: Purchase options are particularly common in single-tenant Alaska commercial leases due to: (i) the limited commercial property inventory in many markets; (ii) tenants' desire to capture property value increases from their own improvements; and (iii) difficulty refinancing or selling single-tenant properties in smaller Alaska markets. The purchase option should be recorded via memorandum of lease to provide constructive notice.

11. RENEWAL OPTIONS

• Number: [____] option(s) of [____] years each
• Notice: [____] months prior to expiration
• Rent: ☐ FMV ☐ Fixed $[____]/RSF ☐ [____]% increase ☐ Greater of FMV or [____]%

FMV Process:

1. Agree within [____] days.
2. Each appoints MAI appraiser with Alaska commercial appraisal experience within [____] days.
3. If within [____]%, FMV = average.
4. Otherwise, third appraiser; baseball arbitration.
5. Excludes Tenant improvements, goodwill, going-concern.
6. Floor: ☐ None ☐ [____]% of expiring rent

Alaska FMV Challenge: Alaska's limited comparable property data, particularly outside Anchorage, makes FMV determinations more difficult and potentially more contentious. Require appraisers with Alaska-specific expertise (minimum [____] years of Alaska commercial appraisal). Consider whether comparable data from the Lower 48 may be used as secondary evidence when Alaska comparables are insufficient.

12. SIGNAGE

• Tenant has exclusive signage rights:
• ☐ Building exterior
• ☐ Monument / pylon
• ☐ Directional
• ☐ Flagpole / banner
• Subject to municipal ordinances (if applicable), CC&Rs, and Landlord approval
• Note: In unorganized boroughs, there may be no local sign regulations

13. PARKING AND SITE

• Spaces: [____] total ([____] per 1,000 RSF)
• Type: ☐ Surface ☐ Covered ☐ Heated Garage
• Exclusive Use: As sole tenant, exclusive parking and site access
• Engine Block Heater Plug-Ins: ☐ [____] spaces with plug-ins ☐ All spaces ☐ Not applicable
• Snow Removal: ☐ Tenant responsibility ☐ Landlord (NNN pass-through) ☐ Third-party contract
• Yard / Outdoor Storage: ☐ Permitted ([____] SF) ☐ Not permitted
• Trailer / Equipment Staging: ☐ [____] stalls ☐ N/A

Alaska Parking Essentials:
- Plug-Ins: Engine block heater plug-ins are essential in Fairbanks and interior Alaska (-40degF or colder) and highly desirable in Anchorage during cold snaps. Without plug-ins, vehicles may not start. Allocate electrical costs clearly.
- Snow Removal: Plan for significant snowfall (Anchorage: ~75 inches/year; Valdez: ~300+ inches/year). Define removal frequency, snow stacking areas, and spring cleanup.
- Ice Management: Sand and gravel (not just salt) for parking areas -- salt is less effective at extreme cold temperatures.
- Seasonal Access: Some rural properties may face seasonal road access limitations.

14. ASSIGNMENT AND SUBLETTING

• Consent required, not unreasonably withheld.
• Permitted Transfers: Affiliates, merger/consolidation successors, asset purchasers with net worth of $[________________________________]+.
• Profit Sharing: ☐ N/A ☐ Landlord gets [____]%
• Recapture: ☐ No ☐ Landlord may recapture upon full assignment

Alaska Note: Single-tenant properties in smaller Alaska markets may have limited assignment/subletting potential. Tenants should negotiate broad permitted transfer provisions and resist unreasonable assignment restrictions.

15. INSURANCE AND INDEMNITY

Tenant Requirements (NNN):

• CGL: $[________________________________] / $[________________________________]
• Property Insurance: Full replacement cost of Building and improvements
• Workers' Comp: Statutory (Alaska rates -- among highest nationally)
• Business Interruption: [____] months
• Earthquake: ☐ Required ☐ Not required (see below)
• Flood: ☐ Required (FEMA zone) ☐ Not required
• Environmental: ☐ Required ☐ Not required
• Boiler / Machinery: ☐ Required (for heating systems) ☐ Not required

Mutual Provisions:

• Waiver of subrogation; additional insured; mutual indemnification

Alaska Earthquake Insurance (Critical): Alaska averages over 40,000 earthquakes per year, including several magnitude 7.0+ events per decade. The 2018 M7.1 Anchorage earthquake and the 1964 M9.2 Great Alaska Earthquake demonstrate the severity of seismic risk. Standard property policies exclude earthquake. In a single-tenant NNN lease:
- Coverage: Determine whether earthquake insurance is required or optional
- Deductible: Typically 5-15% of insured value -- a significant out-of-pocket exposure. Clearly allocate deductible responsibility
- Premium Allocation: If NNN, Tenant bears earthquake premium. Premiums vary by location, building age, construction type, and seismic zone
- Business Interruption: Standard earthquake BI has a separate waiting period (typically 72 hours)
- Restoration Standard: Address whether post-earthquake restoration must meet current (potentially updated) seismic code

Alaska Workers' Comp Note: Alaska workers' compensation rates are among the highest in the nation. This affects both construction costs for build-to-suit and ongoing operating costs for Tenant's business.

16. ENVIRONMENTAL

Landlord Representations:

• No Hazardous Materials contamination (to actual knowledge)
• No USTs (or if present: [________________________________])
• Not on EPA NPL or ADEC contaminated sites database
• No pending environmental actions

Due Diligence:

• ☐ Phase I ESA by Tenant
• ☐ Landlord provides existing reports
• ☐ Environmental condition satisfactory to Tenant is a Lease condition
• ☐ ADEC contaminated sites database search (contaminated sites database)

Ongoing:

• No Hazardous Materials except in compliance with law
• Mutual indemnification (Tenant: Tenant contamination; Landlord: pre-existing)

Alaska Environmental (AS 46.03 / CERCLA) -- Critical for Single-Tenant:

In a single-tenant lease, the tenant often has operational control of the entire property, which can create CERCLA "operator" liability under 42 U.S.C. § 9607(a). Key Alaska-specific environmental risks:

• Heating Oil Tanks: Widespread in Alaska due to heating oil dependence. Both underground and above-ground tanks are common. ADEC tracks approximately 2,400+ contaminated sites, many petroleum-related. Confirm tank status, registration, and compliance.
• Prior Military Use: Eight Alaska sites are on the EPA National Priorities List (Superfund), mostly former military installations. Properties near military bases (Joint Base Elmendorf-Richardson, Eielson AFB, Fort Wainwright, Clear AFS) should be evaluated for contamination migration.
• Mining / Resource Extraction: Alaska's mining history creates potential for heavy metal and chemical contamination. Properties near active or former mining sites require enhanced due diligence.
• ADEC Brownfields Program: Provides liability protections for qualifying purchasers and developers. Consider whether Brownfields program participation could benefit the parties.
• AS 46.03.822: Property owners/operators are generally liable for cleanup. In a single-tenant NNN lease, clearly define environmental indemnification obligations and ensure Tenant's environmental liability insurance covers operator liability.

17. CASUALTY AND CONDEMNATION

Casualty:

• Restoration exceeding [____] days: either party may terminate.
• Rent abates proportionally.
• Landlord restores to pre-casualty condition (excluding Tenant's property).

Condemnation:

• Material taking: either party may terminate.
• Tenant's separate claim for relocation, business loss, unamortized improvements.

Alaska Seismic / Extreme Weather Casualty Note:
- Earthquake: Address earthquake as a specific casualty trigger. Post-earthquake restoration may require upgrading to current seismic code, which could substantially exceed pre-earthquake construction costs. Contractor availability and material supply post-earthquake may be extremely limited.
- Extended Restoration: Alaska's limited contractor pool, supply chain constraints, and short construction season mean restoration following a major casualty may take significantly longer than in the Lower 48. A building destroyed in October may not be fully restored until the following summer or later. Restoration timelines should reflect Alaska realities.
- Permafrost Damage: Address whether permafrost-related damage (thaw settlement, frost heave) constitutes a "casualty." Gradual settlement may be better characterized as a maintenance obligation, while sudden catastrophic settlement may be a casualty event.
- Insurance Proceeds Gap: If restoration costs exceed insurance proceeds (common after major earthquakes), define who bears the shortfall and whether Tenant has a termination right.

18. SNDA

• Landlord delivers SNDA from each lender within [____] days.
• SNDA recognizes Lease and all rights (purchase option, renewals) upon foreclosure.
• Estoppel within [____] business days.

19. SECURITY DEPOSIT

• Amount: $[________________________________] ([____] months' Base Rent plus NNN)
• Form: ☐ Cash ☐ Letter of Credit ☐ Other: [____]
• LOC Terms: Irrevocable, standby, auto-renewing, drawable upon default
• Reduction: [____]% after Year [____] if no default

Alaska Note: No commercial security deposit statute (AS 34.03 residential provisions do not apply). All terms governed by Lease. Specify permitted deductions, return timeline, itemization, and interest.

20. BROKERS

• Landlord's Broker: [________________________________]
• Tenant's Broker: [________________________________]
• Commissions per separate agreement. Mutual indemnification.

21. CONFIDENTIALITY

• Terms confidential except: (i) as required by law; (ii) to attorneys, accountants, lenders, advisors; (iii) public company disclosures.
• Survives [____] months.

22. BINDING PROVISIONS

Binding upon execution:

(a) Exclusivity: Through [__/__/____], no marketing or leasing of Property to third parties.

(b) Confidentiality: Section 21.

(c) Broker Indemnification: Section 20.

(d) Governing Law and Venue: Laws of Alaska. Disputes in [________________________________] Judicial District, Alaska.

(e) Expenses: Each party bears own costs.

(f) No Agreement to Negotiate: Not an agreement to negotiate or agree. No obligation to continue negotiations or enter a Lease.

Alaska Judicial Districts: First (Juneau/Southeast), Second (Nome/Northwest), Third (Anchorage/Southcentral), Fourth (Fairbanks/Interior). Select based on Property location.

23. ADDITIONAL ALASKA-SPECIFIC PROVISIONS

(a) Extreme Weather Operations:

• Landlord warrants heating system capable of maintaining [____]degF interior temperature at -[____]degF exterior
• Pipe freeze prevention: Heat trace, insulation, and winterization protocols required
• Building closure protocols during extreme cold (below -[____]degF)
• Emergency generator: ☐ Required (minimum [____] hours fuel capacity) ☐ Not required

(b) Seismic Preparedness:

• Landlord represents Building seismic design category: [____]
• Earthquake emergency plan required in Lease
• Post-earthquake structural inspection: Tenant may engage engineer before reoccupying if magnitude exceeds [____]
• Seismic shut-off valves for gas lines: ☐ Installed ☐ To be installed ☐ N/A

(c) Permafrost (if applicable):

• Foundation monitoring: ☐ Annual thermistor readings ☐ Settlement surveys ☐ Thermosyphon inspections
• Responsibility: ☐ Landlord ☐ Tenant ☐ Shared
• Termination right if settlement exceeds [____] inches or renders Premises unsafe
• Climate adaptation: Address anticipated permafrost degradation over the Lease Term

(d) Supply Chain Acknowledgment:

• Materials require [____]-[____] weeks from Lower 48
• Barge service (if coastal): Seasonal, typically May-October
• Force majeure includes shipping/transportation disruptions
• Tenant may stockpile critical replacement parts and materials on-site

(e) Daylight and Energy:

• Northern Alaska: Extended winter darkness increases lighting/energy costs
• Summer: Extended daylight reduces lighting costs but increases cooling loads in some buildings
• Address seasonal utility cost variations in NNN calculations

(f) Utility Reliability:

• Rural Alaska: Utility service from small local providers; limited redundancy
• Backup power requirements: [________________________________]
• Rent abatement for extended utility outages exceeding [____] consecutive hours not caused by Tenant

(g) Access and Roads:

• ☐ Year-round paved road access ☐ Seasonal road (specify months: [________________________________]) ☐ Air access only ☐ Water/barge access only
• Landlord's obligation to maintain road access to the Property: [________________________________]
• Snow plowing responsibility for access roads: ☐ Municipal ☐ Landlord ☐ Tenant ☐ State (DOT)

(h) Borough / Municipal Requirements: Confirm applicable requirements including business licenses, land use permits, and local codes.

24. LEASE NEGOTIATION TIMELINE

25. FORCE MAJEURE

Neither party liable for delays from: acts of God, earthquake, volcanic eruption, tsunami, extreme cold, blizzard, avalanche, flood, wildfire, pandemic, government orders, strikes, shipping/barge disruptions, Alaska Highway closures, material supply delays, or causes beyond reasonable control. Prompt notice and reasonable mitigation required.

Alaska Note: Force majeure in Alaska should enumerate: seismic events (including extended aftershock sequences), volcanic eruptions and ashfall (Alaska has 130+ volcanoes, ~50 historically active), extreme cold events, transportation disruptions (road closures, cancelled flights, delayed barges), wildfire and smoke events, and supply chain delays inherent to Alaska logistics.

26. COUNTERPARTS AND ELECTRONIC SIGNATURES

Counterparts permitted. Electronic signatures valid under Alaska Uniform Electronic Transactions Act (AS 09.80).

PRACTICE TIPS FOR ALASKA SINGLE-TENANT COMMERCIAL LEASE LOI

1. Heating System Due Diligence: Inspect the heating system thoroughly before committing. A failed heating system in January in Fairbanks can destroy a building within hours through pipe freezing. Require a warranty period and confirm fuel supply reliability.

2. Earthquake Insurance Allocation: This is often the most contentious insurance issue in Alaska NNN leases. Deductibles of 5-15% of insured value represent enormous exposure. Negotiate clear deductible allocation and consider a cap on Tenant's earthquake deductible obligation.

3. Permafrost Risk Assessment: If the Property is in a permafrost area, obtain a geotechnical report addressing current permafrost conditions and projected degradation due to climate change. Foundation repairs on permafrost can cost hundreds of thousands of dollars.

4. Construction Season Planning: Factor Alaska's short construction season into all timelines. A build-to-suit that misses the May start date may not be completed until the following year. Include a "seasonal carryover" provision.

5. Supply Chain Contingencies: Build 2-6+ weeks of lead time into all material procurement schedules. For barge-dependent communities, plan 3-6 months ahead. Consider stockpiling critical items.

6. NNN Heating Cost Exposure: In interior Alaska, heating costs can be $10-15/RSF or more. Obtain multiple years of utility history and model worst-case scenarios. Consider a heating cost cap or escalation mechanism separate from other operating expenses.

7. Environmental Due Diligence: Check the ADEC contaminated sites database for the Property and surrounding parcels. Heating oil tank history is a key concern. Obtain tank documentation (registration, leak testing, closure records).

8. Purchase Option Value: Purchase options are particularly valuable in Alaska's limited commercial markets. Record a memorandum of lease to protect the option against third parties.

9. Foundation Inspection: Even for non-permafrost properties, Alaska's freeze-thaw cycles and seismic activity can cause foundation problems. Require a structural/geotechnical inspection before committing.

10. Backup Power: Power outages are more frequent in rural Alaska. For critical operations, require backup generator capacity with sufficient fuel storage to run for [____] hours minimum. Address generator maintenance and testing protocols.

SIGNATURES

This LOI is non-binding except for the Binding Provisions in Section 22.

LANDLORD:                                    TENANT:

Entity: ______________________________      Entity: ______________________________

By: __________________________________      By: __________________________________

Name: ________________________________      Name: ________________________________

Title: _______________________________      Title: _______________________________

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

SOURCES AND REFERENCES

• AS 34.03 -- Uniform Residential Landlord and Tenant Act
• AS 09.25.010 -- Statute of Frauds
• AS 46.03 -- Environmental Conservation / Cleanup Liability
• AS 46.03.822 -- Environmental Cleanup Liability
• ADEC -- Contaminated Sites Program
• ADEC -- Brownfields Liability Issues
• Alaska Seismic Hazards Safety Commission -- Code Adoption
• Municipality of Anchorage -- Building Codes
• Alaska Building Codes -- UpCodes
• 42 U.S.C. § 9601 et seq. -- CERCLA
• EPA -- CERCLA and Federal Facilities