White Paper

Estimates in Letters of Intent Can Come Back to Bite

 
With the beginning of the new year, it is important to remember that letters of intent—and landlord generated items delivered pursuant to a letter of intent ‐ have legal consequences, even when the terms of the letter of intent clearly state that matters covered in the letter of intent are “estimates”, and that the letter of intent does not evidence a “binding contract.” A recent case in point is the Thrifty Payless v. The Americana at Brand case decided in 2013.1

Background and Issues Raised
The case arose from a lease transaction between Thrifty and The Americana at Brand at its shopping center in Glendale, California. Landlord’s agent prepared a letter of intent that, among other things, listed Thrifty’s share of “estimated” real property taxes, insurance and common area expenses for the first year of the lease term. The letter of intent clearly identified the dollar amounts for these charges as estimates. Thrifty requested a budget and, in response, landlord’s vice president for leasing provided Thrifty with a budget and wrote “[p]lease remember that the costs reflected are purely estimated values.”

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Manuel Fishman, Esq. is a Shareholder with Buchalter Nemer. He focuses his practice on representing real estate developers and owners in the acquisition, sale and financing of commercial properties. Mr. Fishman has an active leasing practice representing owners of several major office buildings in San Francisco, including the Transamerica Pyramid, as well as tenants in lease and sublease transactions. He serves as chair of the Building Owners and Managers Association of San Francisco’s Government Affairs and Policy Advisory Committee.

Faculty

Manuel Fishman, Esq.

Manuel Fishman, Esq.

Buchalter Nemer