8A — December 14 - 27, 2018 — Commercial Real Estate Law — M id A tlantic
Real Estate Journal
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C ommercial R eal E state L aw By Sarah Yocum Rider, Barley Snyder Letters of Intent - Are they Worth the Time and Risk?
etters of intent are of- ten considered a nec- essary first step in a commercial real estate transaction, such as an acquisition, sale or lease. Parties, how- ever, should carefully con- sider wheth- er entering into a letter of intent is worth the time and risk. Agreement on the basic terms of a transaction in a let- ter of intent tends to facilitate L Sarah Yocum Rider
agreement on the remaining terms and typically makes the parties more committed to finalizing a deal. However, a poorly drafted letter of intent, particularly one with ambigu- ous terms – or lack of clear, non-binding language – will often impede a transaction or cause the parties to waste time and money. Letters of intent are, when drafted correctly, non-binding documents that outline key terms of a business deal, while leaving the remaining issues (and the details of the agreed upon terms) to future negotia- tion and drafting. Many letters
of intent include a defined length of time during which the parties will negotiate the comprehensive agreement, whether it be a purchase agreement or lease. The letter of intent should state that it will automatically terminate after that time period expires or, that either party may ter- minate the letter of intent at any time thereafter by provid- ing written notice. To avoid a letter of intent from legally binding the par- ties, it is important to include a separate provision clearly stating that the provisions contained in the letter are
not legally binding. Although a letter of intent is typically non-binding, it is very com- mon for certain provisions in the letter to bind the parties, such as confidentiality, exclu- sivity/no shop and brokerage payment provisions. In the case of confidentiality, make sure this provision does not preclude seeking professional assistance from advisers, such as attorneys, accountants or prospective lenders. These binding provisions should be carefully drafted so it is completely clear that they are independent, legally binding obligations and are enforce-
able. Another common provision in a letter of intent is an ob- ligation to negotiate in good faith. It is imperative, how- ever, that this obligation to negotiate in good faith not be included as a binding provi- sion. If it were, one party could claim that by not following through with the transaction, the other party breached the good faith obligation and could be subject to legal action. Although letters of intent are often useful in establishing business terms of a purchase agreement or lease, parties should consider creating a simple term sheet and pro- ceeding directly to a compre- hensive agreement. If you do decide to enter into a letter of intent, it is important to have the letter of intent reviewed by legal counsel to make sure you are adequately protected. If you have any questions re- garding letters of intent, feel free to call us. Sarah Yocum Rider is an attorney at Barley Sny- der in central Pennsylva- nia and a member of the firm’s Real Estate Practice Group. AJC NJ honors Hammer of Brach Eichler LLC MILLBURN, NJ — The New Jersey Region of AJC will honor Alan R. Hammer , tory award dinner on Monday evening, December 10th at the Hilton Short Hills in Short Hills, New Jersey. The National Judge Learned Hand Award was established by AJC in 1964 to honor the memory of Judge Learned Hand for his extensive range of decisions which he ten- dered in more than 2,000 cases throughout his lifetime, especially those centering on questions of constitutional rights and anti-trust legisla- tion. The annual award was created to cite leaders in the legal profession for excellence and for their contributions to the legal community. Alan R. Hammer a memb e r o f B r a c h E i c h l e r LLC , wi th i t s p r e s t i - g i o u s Na - tional Judge L e a r n e d Hand Award at a celebra-
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