How to Read a Retail Lease LOI in Los Angeles, Clause by Clause

We write and negotiate retail LOIs for tenants and landlords across Los Angeles, including repeat site work for a multi location discount retailer and recent leases like an 8,400 square foot, ten year retail lease at 2160 Foothill Boulevard in La Cañada. The structure below is the one we use. Each section covers what the clause says, what a good version looks like, and what goes wrong when it is loose.

What a retail LOI is, and what it is not

A letter of intent sets out the business deal so the landlord's attorney can draft a lease that matches it. A well written LOI says plainly that it is non binding until a lease is signed by both sides, that either party spends money before then at its own risk, and that the offer expires on a stated date. Ten business days is common.

Non binding does not mean unimportant. Once both sides sign the LOI, the landlord's attorney drafts from it, and every change you want afterward becomes a "re trade." Re trades cost goodwill and time, and time is what tenants usually run out of first.

Premises, floor area, and how the space is measured

The LOI names the address, the suite, and "approximately" a rentable square footage. Rent and NNN charges are multiplied by that number for the whole term, so it matters more than it looks.

Ask for: the measurement standard (rentable or usable, and whether a load factor applies), and language that rent will not rise if a later measurement comes in larger. On a 10,000 square foot space at $3.00 per foot per month, a 5% measurement swing is $1,500 a month for the entire term.

Permitted use and exclusives

This is the most important clause in a retail LOI, and the one most often written in a single vague line.

A strong use clause names the use and the trade name, lets the tenant operate that use for the entire term, and includes a landlord warranty that no recorded or unrecorded restriction, and no other tenant's exclusive, prohibits it. In a multi tenant center, existing leases may give a neighbor the exclusive right to sell what you sell. A warranty in the LOI puts that risk on the party who can actually check it.

If the tenant needs its own exclusive, for example no other discount variety store in the center, ask for it here, in writing, with the remedy if the landlord breaks it.

Base rent, NNN charges, and escalations

Retail rent in Los Angeles is usually quoted per square foot per month, plus NNN, which passes through the property's taxes, insurance, and common area maintenance. Kidder Mathews put the average Los Angeles retail asking rent at $2.75 per square foot per month in Q3 2026. Your number depends on the corridor, frontage, and parking.

A clean LOI shows the math: base rent, the current NNN estimate, and the total monthly figure in dollars. Writing out the dollar total catches errors before they reach the lease. If you are not sure how NNN differs from a gross or modified gross lease, read NNN vs. gross vs. modified gross leases before you compare two proposals.

Ask for: the NNN estimate in writing, a cap on how much controllable CAM can rise each year, and the right to audit the annual reconciliation. Escalations are typically a fixed 3% a year in this market. Make sure the LOI says whether the escalation applies to base rent only.

Term, options, and option rent

Term is the initial lease length, commonly five or ten years for retail. Options give the tenant the right, not the obligation, to extend, often two five year periods.

The trap is option rent. "Rent during each option period shall increase by 3% annually" leaves open whether the first option year steps up from the last year of the original term or resets to fair market value. Both readings are reasonable, which is exactly the problem. Write the first year of each option as a defined number or a defined formula, and say how fair market value is decided if that is the method.

Commencement, rent commencement, and free rent

These are three different dates and the LOI should name all three:

• Lease commencement, when the term starts and the tenant gets possession.
• Rent commencement, when payments start. For retail this should usually be tied to the earlier of opening for business or a set number of days after the landlord delivers the space and permits are issued, not to a calendar date.
• Abatement, the free rent period. State whether it covers base rent only or "rent and all additional charges." On an NNN lease that difference is real money every month.

Tying rent commencement to permits matters in Los Angeles, where plan check and permitting for a retail build out can take months. A calendar date shifts that risk entirely to the tenant.

Delivery condition and tenant improvements

Delivery condition is what the landlord hands over: roof watertight, HVAC, plumbing, electrical and sprinklers in good working order, utilities separately metered, and the premises compliant with code and ADA requirements for the stated use. Put a warranty period on the building systems, often 90 days to a year.

Tenant improvements are either landlord work, built by the landlord to an agreed plan, or a TI allowance, a dollar amount the landlord reimburses. If it is an allowance, the LOI should say when it is paid, what invoices and lien releases are required, and whether unused allowance can be applied to rent.

California adds one item: under Civil Code section 1938, a commercial lease must state whether the premises have been inspected by a Certified Access Specialist (CASp). Raise it in the LOI so the cost of any required accessibility work is allocated before anyone signs.

Signage, assignment, and the rest

• Signage: the maximum building and pylon signage allowed by code, at tenant cost, landlord approval not to be unreasonably withheld. For retail this is not a detail. It is the storefront.
• Assignment and subletting: allowed with landlord consent not unreasonably withheld, and ideally allowed without consent to an affiliate or a buyer of the business.
• Contingencies: permits, financing, or landlord approval of tenant financials, each with a deadline.
• Brokerage: who pays the commission, and the percentage. Usually the landlord.
• Expiration: how long the offer stands.

The terms worth fighting for before the lease

Every term can be negotiated later. These are the ones that rarely move once the lease is drafted, so settle them in the LOI:

Read the lease against the LOI

When the lease draft arrives, compare it to the signed LOI line by line before anyone reads the boilerplate. We regularly find drafts where the free rent shrank, the option language changed, or the use clause lost the landlord warranty. Those are usually drafting slips, not bad faith, but they become binding the moment the lease is signed. The LOI is your record of what was agreed. Use it.

Sources

1. Kidder Mathews, 3Q 2026 Los Angeles Retail Market Report (opens in a new tab), average asking rent
2. California Civil Code section 1938 (CASp disclosure) (opens in a new tab)