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

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

Alabama Practice Note: Alabama strongly adheres to freedom of contract principles for commercial leases. The Alabama Uniform Residential Landlord and Tenant Act (Ala. Code § 35-9A-101 et seq.) does not apply to commercial tenancies. Commercial lease terms are governed by common law contract principles, and Alabama courts generally enforce bargained-for terms between competent parties. Under Ala. Code § 35-4-20, leases exceeding one year must be in writing.

LOI Enforceability: Alabama courts evaluate LOI enforceability based on intent, specificity of terms, and whether the document manifests a present intent to be bound. An LOI expressly disclaiming binding effect will generally be treated as non-binding for its substantive 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 DESCRIPTION

Property:

• Property Address: [________________________________]
• City/County: [________________________________], Alabama
• Property Type: ☐ Industrial / Warehouse ☐ Office ☐ Retail (Freestanding) ☐ Flex ☐ Medical ☐ Manufacturing ☐ 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: ☐ Central ☐ Rooftop Units ☐ Split Systems ☐ Other: [____]

Single-Tenant Specific:

• This LOI contemplates Tenant's lease of the entire Building and exclusive use of surrounding parking and land areas.
• ☐ Build-to-Suit: Landlord to construct per mutually agreed specifications (see Section 7)
• ☐ Existing Building: Tenant to occupy existing improvements

Measurement Standard:

• ☐ BOMA 2017 (Office) ☐ BOMA 2010 (Retail) ☐ Actual / As-Built ☐ Other: [________________________________]

3. LEASE TERM AND COMMENCEMENT

• Initial Term: [____] years [____] months
• Anticipated Commencement Date: [__/__/____]
• Rent Commencement Date: ☐ Same as Commencement Date ☐ [____] days after Commencement ☐ Upon Substantial Completion of Landlord Work ☐ Upon Certificate of Occupancy ☐ Other: [________________________________]
• Expiration Date: [__/__/____]
• Early Access / Fixturing Period: [____] days prior to Commencement Date at no charge for Base Rent (Tenant responsible for utilities and insurance)

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 for each day of delay beyond the Outside Delivery Date.
• Extended Delay Termination: If delivery does not occur within [____] days after the Outside Delivery Date, Tenant may terminate upon [____] days' written notice. Landlord shall return all deposits and reimburse Tenant's documented costs up to $[________________________________].
• Severe Weather Extension: Outside Delivery Date extended day-for-day for delays caused by tornado, hurricane, severe weather, or other force majeure events.

5. BASE RENT AND ESCALATIONS

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

• Annual Escalation: ☐ Fixed at [____]% per annum ☐ CPI-based (capped at [____]%) ☐ FMV reset at Year [____] ☐ Other: [________________________________]
• Free Rent / Abatement: [____] months of Base Rent abatement following Commencement Date

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

Triple Net (NNN) Structure:

As the sole tenant, Tenant shall be responsible for 100% of:

(a) Real Property Taxes:

• All real property taxes, assessments, and governmental charges
• Estimated Year 1: $[____]/RSF
• Includes supplemental tax bills and special assessments

(b) Insurance:

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

(c) Property Maintenance and Repair:

• All costs of maintaining, repairing, and operating the Property (allocation per Section 8)
• Estimated Year 1: $[____]/RSF

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

Alabama Property Tax Note: Alabama commercial real property (Class II) is assessed at 20% of fair market value. Millage rates vary by county and municipality. Unlike states with reassessment-upon-sale mechanisms, Alabama conducts periodic reappraisals as directed by the Alabama Department of Revenue. In a single-tenant NNN lease where Tenant pays 100% of property taxes, the parties should: (i) define the baseline assessment; (ii) address whether Tenant bears increases from periodic reappraisals; and (iii) confirm current millage rates and any pending reassessment with the county tax assessor's office.

Special Assessments: Certain Alabama municipalities and counties impose special assessments for infrastructure, road improvements, and economic development districts. These can be significant and should be identified during due diligence.

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

Option A: Tenant Improvement Allowance (Existing Building)

• TIA Amount: $[____] per RSF (total: approximately $[________________________________])
• Disbursement: ☐ Lump sum ☐ Progress payments ☐ Rent credit
• Unused TIA: ☐ Forfeited ☐ Rent credit up to [____]% ☐ Cash to Tenant up to [____]%
• Must be utilized within [____] months of Commencement

Option B: Build-to-Suit

• Landlord shall construct or renovate per mutually agreed plans, with a construction budget of approximately $[________________________________].
• Design Phase: Tenant to provide space plan within [____] days of LOI execution; construction drawings within [____] days.
• Construction Timeline: Commence within [____] days of permit issuance; substantial completion within [____] months.
• Cost Overruns: ☐ Landlord bears all ☐ Tenant bears above $[____] ☐ Shared [____]% / [____]%
• Change Orders: Tenant-initiated changes at Tenant's cost; written estimates within [____] business days.

Code Compliance:

Alabama Contractor Licensing: Construction work exceeding $50,000 must be performed by contractors licensed under the Alabama General Contractors Licensing Act (Ala. Code § 34-8-1 et seq.). Verify contractor licensing with the Alabama Licensing Board for General Contractors.

Wind-Load / Storm Resistance Standards: For build-to-suit construction, specify compliance with current IBC wind-load requirements for the Property's location. Alabama's northern and central regions face tornado risk; coastal areas face hurricane wind loads. The Alabama Building Code incorporates IBC wind speed maps, and designs should meet or exceed the applicable wind speed zone requirements.

8. MAINTENANCE, REPAIR, AND STRUCTURAL RESPONSIBILITIES

Single-Tenant Allocation:

• Capital Expenditure Threshold: Repairs exceeding $[________________________________] are capital expenditures borne by ☐ Landlord ☐ Tenant ☐ Shared.
• Roof and Structural Warranty: Landlord warrants roof, foundation, and structural elements for [____] years from Commencement Date.

Alabama Storm Damage Note: Given Alabama's severe weather exposure, clearly allocate storm damage repair responsibility. In an Absolute NNN lease, the tenant may bear all repair costs, but many tenants negotiate to limit structural storm damage obligations to Landlord (reimbursable through NNN pass-throughs amortized over the useful life). Address what happens if storm damage exceeds insurance proceeds and who bears the shortfall.

9. PERMITTED USE

• Primary Use: [________________________________]
• Ancillary Uses: [________________________________]
• Prohibited Uses: [________________________________]
• Zoning: Current designation: [________________________________]; Tenant's use ☐ is ☐ is not permitted by right
• Entitlements Required: ☐ None ☐ Special Exception ☐ Variance ☐ Other: [________________________________]

10. PURCHASE OPTION (SINGLE-TENANT SPECIFIC)

☐ Not Applicable

☐ Purchase Option:

• Exercise Window: After Year [____], upon [____] months' written notice
• Purchase Price: ☐ FMV at exercise ☐ Fixed at $[________________________________] ☐ Formula: [________________________________]
• FMV Determination: MAI appraisal per Section 11 process
• Due Diligence: [____] days from exercise
• Closing: Within [____] days of due diligence completion
• Lease terminates upon closing
• Tenant credit for unamortized Tenant-funded improvements

☐ Right of First Refusal to Purchase:

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

Alabama Practice Note: Purchase options in commercial leases are enforceable under Alabama law if they contain sufficiently definite terms (including price or a mechanism to determine price). The option must satisfy the Statute of Frauds (Ala. Code § 35-4-20). Recording a memorandum of lease that references the purchase option provides constructive notice to subsequent purchasers and lenders.

11. RENEWAL OPTIONS

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

FMV Process:

1. Parties attempt to agree within [____] days.
2. Each appoints MAI appraiser within [____] days.
3. If within [____]%, FMV = average.
4. Otherwise, third appraiser; baseball arbitration.
5. Excludes Tenant improvements, goodwill, going-concern.
6. Minimum rent: ☐ No floor ☐ [____]% of expiring rent

12. SIGNAGE

• Tenant has exclusive signage rights, including:
• ☐ Building fascia / exterior
• ☐ Monument / pylon
• ☐ Directional
• ☐ Flagpole / banner
• Subject to municipal sign ordinances, CC&Rs, and Landlord's reasonable approval.

13. PARKING AND SITE

• Parking Spaces: [____] total (ratio: [____] per 1,000 RSF)
• Type: ☐ Surface ☐ Covered ☐ Structured
• Exclusive Use: As sole tenant, exclusive use of all parking and common areas
• Yard / Outdoor Storage: ☐ Permitted ([____] SF) ☐ Not permitted
• Trailer Parking: ☐ [____] stalls ☐ Not applicable

14. ASSIGNMENT AND SUBLETTING

• Landlord's consent required, not unreasonably withheld.
• Permitted Transfers: Affiliates, successors by merger/consolidation, asset purchasers with net worth of at least $[________________________________].
• Profit Sharing: ☐ Not applicable ☐ Landlord gets [____]% of subletting profit
• Recapture: ☐ No ☐ Landlord may recapture upon full assignment request

15. INSURANCE AND INDEMNITY

Tenant Requirements (Single-Tenant NNN):

• CGL: $[________________________________] per occurrence / $[________________________________] aggregate
• Property Insurance (if NNN): Full replacement cost
• Workers' Compensation: Statutory
• Business Interruption: [____] months
• Windstorm / Tornado: ☐ Required (separate or included) ☐ Not required
• Flood Insurance: ☐ Required (if in flood zone per FEMA maps) ☐ Not required

Mutual Provisions:

• Mutual waiver of subrogation
• Landlord as additional insured; Tenant as additional insured on property policy (if applicable)
• Mutual indemnification for negligence/willful misconduct

Alabama Severe Weather Insurance Critical Note: Alabama is among the highest-risk states for tornado and severe storm damage. Standard commercial property policies may exclude or sublimit windstorm damage, particularly in coastal counties subject to hurricane risk. The parties must carefully address: (i) whether separate windstorm/named storm insurance is required; (ii) the applicable percentage deductible for named storms (commonly 2-5% of insured value); (iii) business interruption coverage triggered by weather events; (iv) how insurance proceeds are applied (restoration vs. termination); and (v) the gap between insurance proceeds and actual restoration costs. For properties in Mobile, Baldwin, and other coastal counties, hurricane deductibles and wind pool requirements (Alabama Insurance Underwriting Association) may apply.

16. ENVIRONMENTAL

Landlord Representations:

• No Hazardous Materials contamination in violation of Environmental Laws (to Landlord's actual knowledge)
• No underground storage tanks
• Not on federal or state environmental cleanup lists (EPA NPL, ADEM)
• No pending environmental litigation or enforcement

Due Diligence:

• ☐ Tenant to conduct Phase I ESA
• ☐ Landlord to provide existing reports
• ☐ Environmental condition satisfactory to Tenant is a Lease condition

Ongoing:

• Tenant shall not use/store/dispose of Hazardous Materials except in compliance with law
• Mutual indemnification: Tenant for Tenant-caused contamination; Landlord for pre-existing

Alabama Environmental Note: ADEM (Alabama Department of Environmental Management) administers state environmental programs. Alabama's industrial heritage (steel, coal, chemicals) means that properties in Birmingham, Decatur, Anniston, and other industrial centers may have legacy contamination. Phase I ESA per ASTM E1527-21 is strongly recommended for any property with industrial or manufacturing history. The Alabama Underground Storage Tank Trust Fund (Ala. Code § 22-36-1 et seq.) addresses petroleum release cleanup.

17. CASUALTY AND CONDEMNATION

Casualty:

• If restoration exceeds [____] days, either party may terminate.
• Rent abates proportionally during restoration.
• If Landlord restores, Landlord returns Building to substantially pre-casualty condition (excluding Tenant's property).

Condemnation:

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

Tornado / Severe Storm Casualty Note: Address: (i) extended restoration timelines due to regional contractor/material shortages after widespread weather events; (ii) force majeure extensions; (iii) whether Tenant can terminate if restoration is delayed by more than [____] days even if delay is due to force majeure; (iv) obligation to rebuild to current code (which may differ from pre-casualty code); and (v) whether Landlord must carry sufficient insurance to fully restore without requiring Tenant contributions.

18. SNDA

• Landlord delivers SNDA from each lender within [____] days.
• SNDA recognizes Lease and all rights (purchase option, renewals) upon foreclosure.
• Estoppel certificates 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 or non-renewal [____] days before expiration
• Reduction: [____]% reduction after Year [____] if no default

Alabama Note: No commercial security deposit statute exists. All terms governed by Lease contract. Specify: permitted deductions, return timeline, itemization requirements, interest.

20. BROKERS

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

21. CONFIDENTIALITY

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

22. BINDING PROVISIONS

Binding upon execution:

(a) Exclusivity: Through [__/__/____], Landlord shall not market or lease the Property to third parties.

(b) Confidentiality: Section 21.

(c) Broker Indemnification: Section 20.

(d) Governing Law and Venue: Laws of Alabama. Disputes in [________________________________] County, Alabama courts.

(e) Expenses: Each party bears own costs.

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

23. ADDITIONAL ALABAMA-SPECIFIC PROVISIONS

(a) Severe Weather Preparedness:

• Landlord to maintain Building per current Alabama Building Code wind-load standards
• Tornado shelter / safe room: ☐ Required ☐ Not required ☐ To be evaluated
• Emergency communication plan to be included in the Lease

(b) Business Privilege Tax: Alabama Business Privilege Tax (Ala. Code § 40-14A-21 et seq.) is not a property-related tax and should not be included in NNN pass-throughs.

(c) Contractor Licensing: TI work exceeding $50,000 requires licensed contractors (Ala. Code § 34-8-1 et seq.).

(d) Mechanics' Liens: Alabama mechanics' lien statute (Ala. Code § 35-11-210 et seq.) applies. Lease should require lien waivers from all contractors.

(e) Recording: Parties may record a memorandum of lease in the county Probate Court (Ala. Code § 35-4-23) for constructive notice, particularly important if the Lease includes a purchase option.

(f) Alabama Economic Incentives: If applicable, the Lease should address how state and local economic incentives (e.g., Alabama Jobs Act credits, local tax abatements, industrial revenue bonds) affect NNN charges, purchase options, or other economic terms.

24. LEASE NEGOTIATION TIMELINE

25. FORCE MAJEURE

Neither party liable for delays from acts of God, tornado, hurricane, severe weather, fire, flood, pandemic, government orders, strikes, material shortages, or causes beyond reasonable control, with prompt notice and reasonable mitigation.

Alabama Note: Force majeure must directly impact performance. Enumerate specific severe weather events. Define geographic scope.

26. COUNTERPARTS AND ELECTRONIC SIGNATURES

Counterparts permitted. Electronic signatures valid under Alabama Uniform Electronic Transactions Act (Ala. Code § 8-1A-1 et seq.).

PRACTICE TIPS FOR ALABAMA SINGLE-TENANT COMMERCIAL LEASE LOI

1. Freedom of Contract: Alabama commercial leases are governed almost entirely by contract terms. Negotiate every protection you need -- there are few statutory backstops.

2. NNN Cost Allocation: Define clearly what is included in NNN. In single-tenant leases, structural repairs, roof, and parking lot maintenance are key negotiation points.

3. Severe Weather / Tornado Risk: Alabama is a top-5 state for tornado activity. Require adequate windstorm coverage, address deductible allocation, and plan for extended restoration timelines after regional disasters.

4. Build-to-Suit Construction: Include guaranteed maximum price, performance bond requirements (consider Alabama's bond statutes), detailed specifications, and meaningful late-delivery penalties.

5. Purchase Option Recording: If the Lease includes a purchase option, record a memorandum of lease referencing the option to provide constructive notice to subsequent purchasers and lenders.

6. Property Tax Monitoring: Alabama's assessment at 20% of fair market value with varying millage rates means tax obligations can shift with reappraisals. Build in notice requirements for reassessment.

7. Environmental Risks: Alabama's industrial history creates potential for legacy contamination. Phase I ESA is essential for industrial/warehouse properties, particularly in legacy manufacturing areas.

8. Insurance Gaps: Confirm windstorm/tornado coverage is not excluded or sublimited. Coastal properties may need separate wind pool coverage through the Alabama Insurance Underwriting Association.

9. Mechanics' Lien Protection: Alabama's lien statute can encumber the property. Require lien waivers, construction bonds, and address Landlord's self-help rights for unpaid liens.

10. SNDA with Purchase Option: Ensure SNDA explicitly preserves the purchase option upon foreclosure. Without this, the purchase option could be extinguished if Landlord's lender forecloses.

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

• 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 § 34-8-1 et seq. -- General Contractors Licensing
• Ala. Code § 8-1A-1 et seq. -- Uniform Electronic Transactions Act
• Ala. Code § 22-36-1 et seq. -- Underground Storage Tank Trust Fund
• Dentons Q&A: Real Estate Leasing -- Alabama