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Letter of Intent (LOI)

LOI is a document that outlines the basic terms and conditions of a proposed business transaction. In the hospitality industry, LOIs are often used to signal a preliminary agreement between two parties before entering into a formal contract.

What is a Letter of Intent (LOI) in the hospitality industry, and when is it typically used?

A Letter of Intent (LOI) in the hospitality industry is a formal document that outlines the preliminary agreement or understanding between two parties, typically a buyer and a seller, regarding a potential business transaction, such as the sale or lease of a hotel property. It serves as a non-binding expression of the parties' intentions and key terms of the proposed transaction, including the purchase price, payment terms, due diligence period, and other important provisions. LOIs are commonly used during the initial stages of negotiations to establish the framework for further discussions and formalize the parties' commitment to moving forward with the transaction.

What are the key components of a Letter of Intent (LOI) in the context of a hospitality transaction?

The key components of a Letter of Intent (LOI) in the context of a hospitality transaction typically include the identification of the parties involved, a description of the property or assets being transacted, the proposed purchase price or lease terms, the timeline for due diligence and closing, any contingencies or conditions precedent to the transaction, and provisions regarding confidentiality, exclusivity, and dispute resolution. Additionally, the LOI may outline the allocation of responsibilities for expenses incurred during the transaction process and specify the governing law and jurisdiction. While an LOI is generally non-binding, it sets the stage for formal negotiations and the drafting of a definitive agreement to complete the transaction.

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