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

LETTER OF INTENT FOR COMMERCIAL LEASE — SINGLE-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 for a single-tenant property. Except for those provisions expressly identified as binding in Section 19 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

• Property Address: [________________________________], [________________________________], Arkansas [____]
• County: [________________________________]
• Legal Description: ☐ Per Exhibit A ☐ To be confirmed by survey
• Building Size: Approximately [________________________________] rentable square feet
• Land Area: Approximately [________________________________] acres / square feet
• Property Type: ☐ Office ☐ Retail ☐ Industrial / Warehouse ☐ Flex ☐ Medical ☐ Other: [________________________________]
• Year Built / Last Renovated: [____] / [____]
• Zoning Classification: [________________________________]

Single-Tenant Note: Because Tenant will be the sole occupant, the Lease should clearly delineate responsibilities for the entire building structure, building systems (HVAC, roof, structural elements), grounds, parking areas, and all exterior areas. The division of these responsibilities is particularly important in NNN lease structures.

3. LEASE STRUCTURE

Select the applicable lease structure:

• ☐ Absolute Triple Net (NNN): Tenant pays all Operating Expenses, Real Estate Taxes, Insurance, and is responsible for all maintenance, repairs, and replacements (including roof and structure)
• ☐ Triple Net (NNN) — Modified: Tenant pays all Operating Expenses, Real Estate Taxes, and Insurance, but Landlord retains responsibility for roof and structural repairs/replacements
• ☐ Double Net (NN): Tenant pays Real Estate Taxes and Insurance; Landlord pays structural and common area maintenance
• ☐ Modified Gross: Landlord includes [________________________________] in Base Rent
• ☐ Ground Lease: Tenant leases land only and constructs improvements (see Section 9)
• ☐ Build-to-Suit: Landlord constructs improvements to Tenant's specifications (see Section 8)

4. LEASE TERM AND COMMENCEMENT

• Initial Term: [____] years [____] months
• Anticipated Commencement Date: [__/__/____]
• Rent Commencement Date: [__/__/____] or upon the earlier of:
• ☐ [____] days following Delivery of Premises
• ☐ Substantial Completion of Landlord's Work
• ☐ Issuance of Certificate of Occupancy
• ☐ Tenant's opening for business
• ☐ Other: [________________________________]
• Lease Expiration Date: [__/__/____] (subject to adjustment)
• Early Access / Fixturing Period: [____] days prior to Rent Commencement Date, rent-free, for Tenant's fixturing, equipment installation, and move-in

5. DELIVERY OF PREMISES

5.1 Delivery Condition

• ☐ Turnkey / Built-Out per approved plans and specifications
• ☐ Warm Shell (HVAC, electrical, plumbing stubbed; fire-life safety to code; insulated and weather-tight)
• ☐ Cold Shell (structural shell only; Tenant to complete all interior improvements)
• ☐ Existing Condition / As-Is (with Landlord representations regarding building systems)
• ☐ Pad-Ready (Ground Lease — graded, utilities to property line)
• ☐ Other: [________________________________]

5.2 Delivery Timeline

• Target Delivery Date: [__/__/____]
• Outside Delivery Date: [__/__/____]
• Late Delivery Remedies:
• ☐ One (1) day of free Base Rent for each day of delay beyond Outside Delivery Date
• ☐ [____] days of free Base Rent for each day of delay
• ☐ If delay exceeds [____] days, Tenant may terminate upon [____] days' written notice
• ☐ Liquidated damages of $[____] per day of delay
• ☐ Other: [________________________________]

6. RENT

6.1 Base Rent Schedule

• Rent Escalation Method: ☐ Fixed percentage ([____]%) ☐ Fixed dollar amount ($[____]/SF) ☐ CPI (All Urban Consumers, South Region) with floor of [____]% and cap of [____]% ☐ FMV reset every [____] years ☐ Other: [________________________________]

6.2 Additional Rent (NNN Charges)

If the Lease is structured as NNN or Modified NNN:

Real Estate Taxes:

• Estimated Year 1: $[____]/SF (total: $[________________________________])

Arkansas Property Tax Note: Arkansas assesses commercial real property at 20% of appraised market value (A.C.A. § 26-26-303). Millage rates vary by county, city, and school district. As a single-tenant building, the entire tax burden passes to Tenant. Tenant should verify the current assessed value and millage rate with the [________________________________] County Assessor. Tax bills are due October 15, with penalties accruing for late payment. Tenant should negotiate the right to protest assessments directly or require Landlord to do so upon Tenant's reasonable request and at Tenant's cost.

Insurance:

• Estimated Year 1: $[____]/SF
• Landlord shall maintain: property/casualty (replacement cost), commercial general liability, and umbrella coverage
• Tenant shall maintain: commercial general liability ($[________________________________] per occurrence / $[________________________________] aggregate), property insurance for Tenant's improvements and personal property, business interruption, environmental liability (if applicable), and workers' compensation

Operating Expenses / Maintenance:

• Estimated Year 1: $[____]/SF
• In a single-tenant NNN lease, Tenant is typically responsible for all day-to-day maintenance and repairs
• Landlord vs. Tenant Responsibility Matrix:

6.3 Free Rent / Abatement

• Free Rent Period: [____] months of Base Rent abatement
• ☐ Base Rent only ☐ Base Rent and Additional Rent (NNN)
• Recapture of Abated Rent upon Tenant Default: ☐ Yes ☐ No

6.4 Security Deposit / Letter of Credit

• Amount: $[________________________________] (equivalent to [____] months' rent)
• Form: ☐ Cash ☐ Irrevocable Standby Letter of Credit from [________________________________] ☐ Guaranty (see Section 6.5)
• Burn-Down Schedule: Amount reduced to $[________________________________] after Year [____] if no uncured defaults

6.5 Guaranty

• ☐ Personal Guaranty from: [________________________________]
• ☐ Corporate / Parent Guaranty from: [________________________________]
• ☐ Limited Guaranty (amount: $[________________________________] / term: [____] years)
• ☐ Good-Guy Guaranty (guarantor released upon surrender of Premises in good condition)
• ☐ No Guaranty required

7. TENANT IMPROVEMENTS

7.1 Tenant Improvement Allowance

• TI Allowance: $[____]/SF (total: $[________________________________])
• Application: ☐ Hard costs only ☐ Hard and soft costs ☐ FF&E included ☐ Cabling/IT included
• Unused Allowance: ☐ Forfeited ☐ Applied as rent credit over [____] months ☐ Cash payment to Tenant ☐ Other: [________________________________]
• Disbursement: ☐ Progress payments against invoices with lien waivers ☐ Upon substantial completion ☐ Other: [________________________________]

7.2 Landlord's Work

• Scope: [________________________________]
• Plans: ☐ Landlord's architect ☐ Tenant's architect, subject to Landlord approval
• Completion Deadline: [__/__/____]
• Punch List: Landlord to complete within [____] days of Tenant's punch list delivery

7.3 ADA and Code Compliance

• Landlord represents that the Building and site comply with ADA (42 U.S.C. § 12101 et seq.) and all applicable Arkansas building codes as of the Delivery Date
• Ongoing ADA compliance within the Premises: ☐ Tenant ☐ Landlord
• Code upgrades triggered by Tenant's improvements: ☐ Tenant's cost ☐ Landlord's cost ☐ Shared

8. BUILD-TO-SUIT PROVISIONS (IF APPLICABLE)

If this is a build-to-suit transaction:

• Design Responsibility: ☐ Landlord's architect per Tenant's program ☐ Tenant's architect
• Construction Manager / General Contractor: ☐ Landlord-selected ☐ Tenant-selected ☐ Mutually agreed
• Budget: Landlord to construct improvements at an agreed cost of $[____]/SF (or guaranteed maximum price of $[________________________________])
• Cost Overruns: ☐ Landlord's responsibility ☐ Tenant's responsibility ☐ Shared beyond [____]%
• Construction Timeline: [____] months from permit issuance
• Substantial Completion Definition: The improvements are substantially complete per the approved plans, all governmental approvals and certificates of occupancy have been obtained, and only minor punch list items remain
• Warranty: Landlord warrants construction for [____] year(s) from substantial completion; all manufacturer warranties assigned to Tenant

9. GROUND LEASE PROVISIONS (IF APPLICABLE)

If this is a ground lease:

• Land Only: Tenant leases the land and constructs all improvements at Tenant's sole cost
• Ground Rent: $[____] per annum, with escalations of [____]% every [____] years
• Improvement Ownership: During the term, improvements are owned by ☐ Tenant ☐ Landlord
• Reversion at Expiration: ☐ Improvements revert to Landlord ☐ Tenant must remove improvements and restore site ☐ Landlord has option to purchase improvements at [________________________________]
• Leasehold Financing: Tenant shall have the right to obtain leasehold financing secured by Tenant's leasehold interest and improvements, subject to Landlord's reasonable approval of lender and loan documents
• Term: Ground lease terms in Arkansas for single-tenant properties typically range from [____] to [____] years, inclusive of renewal options

10. PURCHASE OPTION (IF APPLICABLE)

• ☐ Tenant shall have the option to purchase the Property:
• Exercise Period: After Year [____] of the Lease Term
• Purchase Price: ☐ Fixed at $[________________________________] ☐ FMV at time of exercise ☐ Formula-based: [________________________________]
• Notice Required: [____] months' prior written notice
• Closing: Within [____] days of exercise
• Due Diligence Period: [____] days from exercise for Tenant's inspections, title review, and financing contingency
• Title: Landlord to convey by general warranty deed, free and clear of all encumbrances except [________________________________]
• ☐ Right of First Refusal on Sale: If Landlord receives a bona fide offer from a third party to purchase the Property, Tenant shall have [____] business days to match such offer
• ☐ No Purchase Option

Arkansas Note: Under Arkansas law, an option to purchase real property must comply with the Statute of Frauds (A.C.A. § 4-59-101). The option agreement should be in writing, signed by the party to be charged, and contain all material terms including the purchase price or a mechanism for determining it. Consider recording a memorandum of lease that references the purchase option to provide constructive notice to third parties.

11. RENEWAL OPTIONS

• Number of Renewal Options: [____]
• Duration of Each Renewal: [____] years
• Renewal Rent:
• ☐ Fair Market Value (FMV), determined per Section 18
• ☐ Fixed escalation: [____]% above the last year's Base Rent
• ☐ Greater of FMV or [____]% increase
• ☐ CPI-adjusted with floor of [____]% and cap of [____]%
• ☐ Other: [________________________________]
• Notice Required: [____] months prior to expiration of the then-current Term
• Conditions: No uncured Event of Default at time of exercise

12. SIGNAGE

• ☐ Tenant shall have exclusive building-top signage rights
• ☐ Monument / pylon signage at property entrance
• ☐ Building-mounted signage on [____] facade(s)
• ☐ Directional signage on site
• All signage at Tenant's cost, subject to Landlord approval and compliance with applicable municipal sign ordinances and any CC&R restrictions
• Tenant responsible for all permits, installation, maintenance, and removal upon Lease expiration

13. PARKING

• Total Parking Spaces on Site: [____]
• Parking Ratio: [____] spaces per 1,000 SF
• All parking for Tenant's exclusive use (single-tenant property)
• ☐ Surface parking ☐ Covered / structured parking ☐ Both
• Tenant responsible for parking area maintenance: ☐ Yes (NNN) ☐ No (Landlord maintains)
• ADA-compliant accessible spaces: [____] (minimum per code)

14. ASSIGNMENT AND SUBLETTING

• Landlord's prior written consent required (not to be unreasonably withheld, conditioned, or delayed)
• Permitted Transfers (no consent required):
• Transfers to affiliates (controlling, controlled by, or under common control)
• Mergers, consolidations, or asset acquisitions, provided successor entity has a net worth of not less than $[________________________________]
• Public offerings or changes in equity ownership that do not result in a change of operational control
• Recapture Right: ☐ Yes — Landlord may terminate the Lease and recapture the Premises upon Tenant's request to assign the entire Lease ☐ No
• Profit Sharing on Sublease: ☐ [____]% to Landlord (after deduction of Tenant's reasonable costs) ☐ None

15. INSURANCE AND INDEMNIFICATION

• Mutual indemnification for each party's negligence or willful misconduct
• Waiver of Subrogation: Mutual waiver for all losses covered by insurance
• Tenant to name Landlord as additional insured
• In NNN leases, Tenant shall carry and pay for all property insurance on the Building and improvements (replacement cost basis)

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

• Landlord shall deliver a commercially reasonable SNDA from each existing and future lender within [____] days of Lease execution
• SNDA shall confirm that Tenant's possession shall not be disturbed so long as Tenant is not in default
• If applicable, Landlord shall also deliver estoppel certificates from any ground lessor

17. BROKERS

• Landlord's Broker: [________________________________] (Arkansas License No. [________________________________])
• Tenant's Broker: [________________________________] (Arkansas License No. [________________________________])
• Commission: Per separate agreement between Landlord and the Brokers

Arkansas Broker Requirement: All brokers must hold valid licenses issued by the Arkansas Real Estate Commission pursuant to A.C.A. § 17-42-101 et seq. Broker minimum experience for licensure is 24 months within the preceding 48 months (A.C.A. § 17-42-303(b)). Written agency disclosure is required for all agency relationships.

• Each party indemnifies the other against claims from any broker other than those named above.

18. FAIR MARKET VALUE DETERMINATION (IF APPLICABLE)

1. Negotiation Period: [____] days from Tenant's exercise of the renewal option.
2. Broker Determination: If unable to agree, each party appoints a licensed Arkansas commercial real estate broker with at least [____] years of experience in the [________________________________] market. Each broker determines FMV independently within [____] days. If the two values are within [____]% of each other, FMV is the average. Otherwise, the brokers select a third, who picks one of the two values (baseball arbitration).
3. FMV Definition: The rental rate for comparable single-tenant properties of similar size, quality, age, and location in the [________________________________], Arkansas market, taking into account concessions (TI, free rent), but excluding the value of Tenant-funded improvements and Tenant's goodwill.

19. BINDING PROVISIONS

The following provisions are legally binding upon execution by both parties:

19.1 Exclusivity

During the period from mutual execution through [__/__/____] (the "Exclusivity Period"), Landlord shall not market, negotiate, or enter into any lease or LOI for the Premises with any third party. Exclusivity expires automatically unless extended in writing.

19.2 Confidentiality

All terms and negotiations shall remain confidential, except disclosures to attorneys, accountants, lenders, brokers, and advisors who agree to maintain confidentiality. Neither party shall issue any press release regarding this LOI or the proposed Lease without the other's prior written consent.

19.3 Broker Indemnification

Each party's brokerage indemnification obligations in Section 17 are binding.

19.4 Governing Law and Venue

This LOI is governed by the laws of the State of Arkansas. Disputes shall be subject to exclusive jurisdiction of state or federal courts in [________________________________] County, Arkansas.

19.5 Expenses

Each party bears its own costs (including attorneys' fees) in connection with the LOI and Lease negotiation.

20. ENVIRONMENTAL REPRESENTATIONS AND DUE DILIGENCE

• Landlord represents, to Landlord's actual knowledge, that:
• ☐ No Hazardous Materials are present on or under the Property in violation of Environmental Laws
• ☐ The Property is not listed on any federal, state, or local contaminated sites registry
• ☐ No underground storage tanks are located on the Property (or, if present: [________________________________])

• ☐ No pending or threatened environmental actions, claims, or orders affect the Property

• Landlord shall provide existing Phase I/II ESA reports within [____] business days

• Tenant may conduct additional environmental investigations during a [____]-day due diligence period at Tenant's expense
• Responsibility for pre-existing environmental conditions: ☐ Landlord ☐ Shared ☐ Other: [________________________________]

Arkansas Environmental Note: The Arkansas Department of Energy and Environment (ADEE) administers environmental regulations. Tenants should be aware of potential CERCLA liability (42 U.S.C. § 9601 et seq.) and the Arkansas Remedial Action Trust Fund Act (A.C.A. § 8-7-501 et seq.). For single-tenant properties, particularly former industrial or agricultural sites, comprehensive environmental due diligence is critical as Tenant may be the sole occupant and could bear significant remediation exposure.

21. ADDITIONAL TERMS

• Holdover: [____]% of last month's Base Rent, plus Additional Rent, for each month of holdover.
• Default Cure Periods: [____] days for monetary defaults; [____] days for non-monetary defaults (with extension for diligent cure).
• Self-Help: After expiration of cure periods and [____] days' additional notice, Tenant may exercise self-help and offset against rent.
• Casualty: If damage exceeds [____]% of replacement value, either party may terminate. Landlord to restore within [____] months or Tenant may terminate.
• Condemnation: If a taking renders the Premises unsuitable for Tenant's use, Tenant may terminate. Each party retains its own condemnation award.
• Estoppel Certificates: Within [____] business days of written request.
• Quiet Enjoyment: Landlord covenants Tenant's quiet enjoyment throughout the Term.
• Memorandum of Lease: Tenant shall have the right to record a memorandum of lease in the real property records of [________________________________] County, Arkansas, pursuant to A.C.A. § 18-12-601 et seq.

22. TIMELINE AND NEXT STEPS

23. PRACTICE TIPS AND ARKANSAS-SPECIFIC NOTES

For Counsel:

1. Statute of Frauds: A.C.A. § 4-59-102 requires leases exceeding one year to be in writing and signed. This LOI expressly states it is not a lease. Ensure the definitive Lease satisfies all formalities.

2. LOI Enforceability: Arkansas courts examine whether parties intended an LOI to be binding. Use clear, unambiguous language distinguishing binding from non-binding terms.

3. Single-Tenant NNN Considerations: In a true NNN single-tenant lease, Tenant assumes virtually all property-level risk. Carefully delineate capital replacement obligations (especially roof and structure), insurance requirements, and environmental responsibilities. Consider caps on capital expenditure obligations or amortization of major replacements over useful life.

4. Property Tax: Arkansas assesses commercial property at 20% of appraised market value. As the sole tenant, Tenant bears the full tax burden. Negotiate the right to protest assessments and ensure that reassessment upon lease execution or improvement construction is anticipated in the rent structure.

5. Build-to-Suit / Ground Lease: If applicable, clearly define the construction budget, cost overrun allocation, warranty obligations, and ownership of improvements at lease termination. For ground leases, ensure the leasehold interest is financeable (lender-required provisions such as notice and cure rights, new lease rights, and recognition agreements).

6. Purchase Option: If included, comply with the Statute of Frauds by specifying all material terms in writing. Record a memorandum of lease referencing the option to provide constructive notice.

7. Environmental: For single-tenant properties (especially former industrial, agricultural, or gasoline station sites), Phase I and potentially Phase II ESAs are essential. Negotiate clear allocation of pre-existing contamination liability.

8. Recording: Under A.C.A. § 18-12-601 et seq., record a memorandum of lease to protect Tenant's leasehold interest, particularly for long-term leases or those with purchase options.

SIGNATURES

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

Except for the Binding Provisions in Section 19, 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 — SITE PLAN AND BUILDING FOOTPRINT

[Attach site plan showing building, parking areas, access points, and property boundaries]

EXHIBIT B — LEGAL DESCRIPTION

[Attach legal description of the Property or reference to recorded plat]

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, § 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
• Arkansas Remedial Action Trust Fund Act, A.C.A. § 8-7-501 et seq.
• Americans with Disabilities Act, 42 U.S.C. § 12101 et seq.
• CERCLA, 42 U.S.C. § 9601 et seq.