A letter of intent clarifies discussions between parties in a land transaction. By providing a nonbinding road map to a successful transaction, a letter of intent is a wise pre-contract tool for any builder/developer.
"In any discussion with a landowner, you want to have a framework for the issues that you will discuss later in the contract," says Leonard Forkas, president of Milestone Communities in Reston, Va. "That's what a letter of intent provides."
A good letter of intent spells out the hurdles to be overcome before a contract is tendered and often provides a time frame for doing the work. Forkas says any number of items can and should be included, but the following are usually present:
- Price.
- Conditions of closing. This is the meat of any good letter of intent. Included are items such as clear title, clear environmental, no encumbrances, confirmation of zoning and confirmation of tenancy.
- Who pays for what at closing. This spells out the money side of incidentals and includes transfer taxes, etc.
- Study period. The buyer defines how long that period will be.
- Deposit due at contract signing. It's usually refundable if the buyer doesn't go forward after the study period.
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