Commercial Real Estate Letters of Intent in Texas

By Hank FasthoffJuly 5, 2026

A commercial real estate letter of intent records the terms a buyer, seller, landlord, or tenant expects to place in a purchase agreement or lease. It can reduce drafting expense by confirming that the parties agree on the economic structure before counsel prepares the definitive contract.

The same document can also produce an early contract dispute. Texas courts determine binding effect from the language of the letter, the terms the parties resolved, and their objective intent. A careful letter states which provisions bind the parties immediately and which provisions depend on a signed definitive agreement.

Texas Courts Examine Objective Intent

An enforceable Texas contract requires objective assent to terms definite enough for a court to determine each party's obligations. The parties may form a contract while planning a more detailed writing, so a reference to future documentation doesn't always postpone contract formation.

In Foreca, S.A. v. GRD Development Co., 758 S.W.2d 744 (Tex. 1988), the Supreme Court of Texas considered writings marked "subject to legal documentation." The Court held that the phrase didn't conclusively establish whether the parties intended an immediate contract or only preliminary negotiations. Conflicting evidence made intent a fact question for the jury.

Specific language produces a different result. John Wood Group USA, Inc. v. ICO, Inc., 26 S.W.3d 12 (Tex. App. Houston [1st Dist.] 2000, pet. denied), enforced a letter's statement that the proposed sale terms were not binding until the parties signed a final purchase agreement. Although the parties agreed on the assets and price, the seller withheld assent to a sale until that event occurred.

The real estate decision in RHS Interests, Inc. v. 2727 Kirby Ltd., 994 S.W.2d 895 (Tex. App. Houston [1st Dist.] 1999, no pet.), applied the same principle. The buyer's letter stated that it served only as an offer and would become binding only when the parties signed an earnest money contract. Preliminary inspections and continued negotiations didn't replace the required signed agreement.

Separate Binding Terms From Proposed Deal Terms

Your letter should state that the proposed purchase or lease terms reflect current negotiations and impose no duty to complete the transaction. It should condition any sale, purchase, or lease obligation on execution and delivery of a definitive agreement acceptable to both parties. The condition should cover the duty to continue negotiations as well as the duty to close or commence the lease.

A separate section can identify the provisions that bind the parties upon signature. Depending on the transaction, those provisions may include confidentiality, exclusivity, property access, responsibility for expenses, brokerage disclosures, governing law, forum selection, termination, and survival. Each binding provision requires enough detail for a court to determine the promised performance and the available remedy.

Texas law treats a promise to negotiate in good faith with particular caution. John Wood Group held that an agreement to negotiate a future contract remains unenforceable when it supplies no definite obligation, even if it calls for good faith. A general promise to negotiate shouldn't serve as a substitute for specific duties, deadlines, and conditions.

Purchase Letters Need Transaction Specific Terms

A purchase letter should identify the property, purchase price, earnest money structure, feasibility period, financing condition, closing date, and allocation of closing expenses. It can also address title review, survey delivery, environmental and physical inspections, tenant files, service contracts, casualty, condemnation, prorations, and the seller's required closing documents.

Earnest money provisions require more than an amount. Your letter should identify the escrow agent, deposit deadline, refund conditions, any increase after the feasibility period, and the event that makes the deposit nonrefundable. The negotiated structure varies with the property and the parties, so fixed percentages and universal timelines provide poor substitutes for the economics of the transaction.

Property access often begins before the purchase agreement is complete. A binding access provision should address notice, scheduling, insurance, invasive testing, restoration, indemnity, mechanic's liens, contact with tenants or employees, and delivery of reports if the transaction ends. Physical entry without those terms exposes the owner and prospective buyer to risks unrelated to whether the sale closes.

Lease Letters Need More Than Rent and Term

A lease letter should identify the premises and the method used to measure rentable area. It should address the lease term, commencement conditions, base rent, increases, operating expenses, audit rights, tenant improvements, delivery condition, construction responsibility, and remedies for delayed delivery.

Use restrictions, exclusive rights, signage, parking, assignment, subletting, insurance, indemnity, casualty, condemnation, renewal options, expansion rights, and any guaranty can materially affect the bargain. A rent figure says little about a lease when operating expenses, construction duties, or a personal guaranty remain unresolved.

The letter should distinguish the target commencement date from the event that starts rent. If commencement depends on delivery, substantial completion, permits, or tenant construction, the document should identify the controlling event and the consequences of delay. This distinction prevents the draft lease from converting a planning date into an unconditional payment obligation.

The Statute of Frauds Adds Another Risk

Texas Business and Commerce Code Section 26.01 requires a signed writing for a contract to sell real estate and for a real estate lease longer than one year. Texas Property Code Section 5.021 separately requires a conveyance of a freehold or an estate lasting more than one year to be written, signed, and delivered by the person making the conveyance. A signed letter can satisfy the contract requirement when it contains the required terms and shows an intent to contract. The statute of frauds doesn't convert a nonbinding letter into a contract, but it also doesn't protect a party whose signed letter already forms one.

Property identification requires particular attention. In Pick v. Bartel, 659 S.W.2d 636 (Tex. 1983), the Supreme Court of Texas explained that a contract for the sale of land must furnish within itself, or through another identified existing writing, the information needed to identify the property with reasonable certainty. A street address may help negotiations, while the definitive contract usually requires a legal description or another reliable reference.

Exclusivity Requires Defined Conduct and Remedies

An exclusivity provision should state its duration and the conduct it prohibits. The restriction may cover solicitation, negotiation, acceptance of competing proposals, disclosure of deal terms, and assistance to another bidder. It should also identify permitted communications, fiduciary or legal exceptions, early termination events, and the people and affiliates subject to the restriction.

Remedies require equal attention. John Wood Group held that breach of binding exclusivity and confidentiality provisions didn't support benefit of the bargain damages based on the sale that never became binding. The court remanded a claim under a separate liquidated damages provision tied to exclusivity. If the parties want reimbursement or liquidated damages, the letter should state that remedy and comply with the rules governing its enforceability.

Conduct Should Match the Letter

The parties should follow the division between binding and proposed terms after signature. Deposits, inspections, document delivery, public announcements, and negotiations with other prospects should occur under the binding provisions or wait for the definitive agreement. Emails and draft exchanges should use the same reservation of rights rather than suggest that approval or signature has become a formality.

A disciplined letter preserves negotiating flexibility while protecting the limited commitments needed during diligence and drafting. The safest structure identifies the proposed transaction terms, states the condition to contract formation, isolates each binding provision, and defines the remedy for violating it.