Letter of Intent
The Letter of Intent or LoI, ais a document that outlines the agreement between two parties or more involved in a financial venture before coming to a final agreement. The LOI may vary from one agreement to another such as Asset Purchase Agreements, Lease Agreements, Share Purchase Agreements and overall Agreements which are required for the finalization of a large prospective deal.
Letter of Intent: Keys of Conception
The LoI is drafted to look like a contract but is not a binding agreement between the parties involved. However there are a few binding clauses in the agreement including clauses concerning non-disclosure agreements or the covenant to manage the negotiation in good faith. It may also take the shape of a formal contract if its intention is to formally bind the parties and can be presented as such to a court of law.
Basic Focal Point of LoI
Usually the letter of intent is presented by one party to the other for the clarification of points and to negotiates before the finalization and completion of signatures. The document can actually serve as a protection for the clients involved in the deal. It acts as a safeguard during negotiations of concerning the involved deals.
LoI: Objectives and Goals
The most common objectives of the Letter of Intent is to clarify the tenets or points of a financial deal or transaction. It also serves as a means to officially declare that the parties are on the terms of negotiation n a deal. It safeguards the deals from detoriating during the negotiation phase. The major function of the letter is to clarify the methods and details concerned with payments and credits dto third parties. It also ensures that the deal is carried out according to the rules and norms set by the state. The LoI is also considered as a term sheet which deals with the discussions carried out during the negotiation of any deal.
What is ‘Off-Plan’ Property?
In real estate, off-plan refers to property before construction has started. It is generally found that such pre-construction property are targeted towards developers of real estate as well as early adopters. Purchaser are able to secure loans at far better terms of finance from their lenders for off-plan projects.
Property investors can make significant capital gains through off-plan purchases. This typically happens as sellers of an off-plan estate tend to offer substantial financial incentives to those who adopt them early on. Discounts in response to sale plans are quite common. A rising market also provides for opportunity for the growth of capital when development cycles typically range on a year or two.
Advantages of Off-Plan Estates
- In case the area immediately surrounding the estate has access to infrastructure in the form of universities, roads, hospitals and other such public amenities, properties are supposed to be built in the coming few years become even more in-demand.
- When the housing market is witnessing rapid growth this sort of property becomes more lucrative as it is cheaper than constructed property. It also enables the buyer to specify apartment locations and features as the choice may be limited after some time.
Disadvantages of Off-Plan Estates
- In case the values of property witnesses substantial reduction, the loan value is often decreased and may be, as in some cases, be denied. This is truer if the construction is for an investment in comparison to a home. If such an event occurs the buyer may be obliged, under the terms of the contract, to buy the property at the price that was originally offered.
- It might also happen that the constructor finds himself out of business before construction ends leaving the buyer incapable to recover the advanced payments. Bank guarantees are used by countries undergoing recession such as Spain, so that they are protected from bankrupt builders. In times of recession this is a highly risky venture as inflated property prices plummet quickly without clear relief in sight.
- The last issue one might have with off-plan properties is that it may fail to match the expectations of the buyer. This may be due to material defects as well as subjective reasons.
What Does a Memorandum of Understanding Signify?
A memorandum of understanding or MoU is an agreement, which may be multilateral or bilateral, between two or more parties. It is an expression the intentions and relations between the respective parties. It indicates a line of action that is common between the parties dealing with off-plan projects or otherwise. It is usually put into use when the concerned parties are hesitant towards committing legally. The case might also be that it is not possible to come to an agreement that is enforceable legally. Either way it is a more formal alternative to what might be stated simply as a gentlemen’s agreement.
Is a Memorandum of Understanding Legally Binding?
The legality of the document as a legally binding contract depends on the absence or presence of four well defined legal elements. These elements, also often referred to as the ‘four corners’ are the intention, consideration, offer and acceptanceto be bound by the tenets of law.
Memorandum of Understanding: Companies and Governmental Law
MoU’s are put into use by various corporate firms as well as government agencies operating throughout Dubai in order to define relationships between agencies and companies. It is customary in UAE to refer to an MoU simply as a Concordat. It is primarily used tosolidify the business relationship between two parties.
MoU’s between parties over an off-plan project may also be used to declare their intentions in legal terms without the usage of legally binding provisions. Developers often prefer MoU’s for off-plan property as it benefits both parties in expressing the relation and agreements between them.