The LOI Trap: Why So Many Deals Die After the Handshake

September 10, 2026 • Everyone thinks the lease negotiation is what kills deals. In my experience, the Letter of Intent (LOI) is where most of these deals are set up to fail.

The LOI is supposed to reflect a solid business deal, honed by hard conversations and hard decisions. But all too often, that’s not what happens, and no one seems to be aware.

It’s after we begin negotiating the lease, when everything suddenly slows down and frustrations mount, that it becomes clear the deal is on life support.

The lease negotiation didn’t kill the deal. It simply exposed problems that already existed and should have been uncovered long before the drafting began.

Beware of the LOI Trap

Here are three deals that never should have made it past the LOI stage.

The Omakase Restaurant That Couldn’t Cook

 A chef agreed to lease 1,300 square feet in a luxury NYC high-rise for an omakase restaurant. Great location. Rent agreed. The LOI was signed. Everyone moved forward.

 During lease negotiations, the tenant discovered that the premises couldn’t accommodate the hooding and grease trap needed to cook and bake.

For an omakase concept built around a fully functioning open kitchen, this wasn’t a detail. It was the deal.

 By the time this issue surfaced, both sides had spent time, money, and goodwill on a transaction that was never going to work.

The $200,000 Problem That Wasn't in the Budget

An apparel tenant found what seemed like a perfect space in a successful suburban shopping center.

The parties agreed to the basic business terms, including a seemingly reasonable rent, but one that didn’t support any tenant improvement allowance or landlord work. The LOI was finalized and lease negotiations began.

That’s when the tenant discovered a $200,000 problem no one had budgeted for: the HVAC needed to be replaced.

The economic limitations for both the tenant and the landlord, as reflected in the LOI, didn’t leave enough room for either party to absorb the cost.

So the tenant walked.

The Exclusive Carve Out That No One Could Rely On

 In another seemingly promising transaction, both landlord and tenant believed a technical carve-out from an existing exclusive use restriction provided sufficient protection for the new tenant’s intended use.

So the LOI was signed and we proceeded to negotiate the lease.

On paper, there was a reasonable argument that the new use fell within the carve-out. But was “reasonable” good enough to enter into a lease that would obligate the tenant to invest hundreds of thousands of dollars in a space located close to the tenant holding the exclusive?

During lease negotiations, both sides took a harder look at the risk and reached the same conclusion: no one could confidently predict whether the carve-out would protect the new tenant if the existing tenant’s sales later declined and the dispute ended up before a judge or jury.

No one wanted to build a business on “probably.” The deal died.

Three Different Deals. One Problem.

These aren’t stories about careless parties. They’re three different examples of the same problem: the LOI is treated as a formality rather than as a stress test to make sure a deal is solid.

Delivery conditions. Infrastructure. Use restrictions. Economic limitations. Unanticipated costs.

The issues that kill deals at the lease stage almost always existed at the LOI stage — they just weren’t identified, examined or resolved.

 Make sure your LOI process is designed to surface the issues that will matter most. Call us today. You can’t afford not to.