When do you need a letter of intent to buy commercial property in Washington?

Reviewed by Kim Sandher, JD, Seattle University School of Law, admitted to the Washington State Bar Association in 2010. Last reviewed August 2026.

August 2026: first publication. Statutory and regulatory anchors verified against RCW 64.04.005, RCW 64.04.010, RCW 4.28.328, and 40 C.F.R. 312.20 on July 25, 2026.

Is a letter of intent required to buy commercial property in Washington?

No. No Washington statute conditions the purchase of commercial property on a letter of intent. Washington law reaches the transfer itself, requiring every conveyance of real estate, or any interest in it, to be by deed.

• Washington law requires every conveyance of real estate, or any interest in it, and every contract creating or evidencing an encumbrance on real estate, to be by deed (RCW 64.04.010).
• Chapter 64.04 RCW sets out deed requirements and forms. No section of it conditions a purchase on a preliminary letter, term sheet, or offer letter.
• The Washington Supreme Court has described a commercial seller’s brokers sending information packets to prospective buyers and requesting letters of intent stating net purchase price and key deal points. Keystone Land and Development Co. v. Xerox Corp., 152 Wn.2d 171, 94 P.3d 945 (2004).
• If the seller is running a competitive process, then the letter of intent is usually how the seller ranks offers, which makes it a market convention rather than a legal step.
• We typically see Puget Sound sellers hold the data room closed until a letter of intent is signed, which is a commercial gate rather than a statutory one.

Exception: A purchase structured as the acquisition of the entity that owns the property is governed by that entity’s documents rather than by chapter 64.04 RCW, and the preliminary document is a term sheet with different content.

According to RCW 64.04.010, Washington State Legislature, as of July 2026.

Buyers ask this question expecting a yes or a no, and the honest answer sits in between. The law does not require the letter. The market usually does, because a seller with three interested parties needs a way to compare them, and a phone call does not give the seller anything to compare. So the letter is not a legal step you are missing if you skip it. It is a competitive step, and skipping it in a bidding situation tends to mean you are not in the bidding.

For a wider view of how these transactions run in this state, see our overview of commercial real estate purchase and sale practice in Washington.

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Is a commercial letter of intent legally binding in Washington?

It depends on what the document objectively says rather than on the heading at the top. Washington courts separate an agreement to agree, which is not enforceable, from a contract with open terms and from a contract to negotiate.

• Washington law treats an agreement to agree, meaning an agreement requiring a further meeting of the minds before it is complete, as unenforceable. Keystone Land and Development Co. v. Xerox Corp., 152 Wn.2d 171, 94 P.3d 945 (2004).
• In Keystone, the Washington Supreme Court answered the Ninth Circuit’s certified question in the negative: on the facts presented, the exchange of letters did not create an enforceable contract to negotiate. Keystone, 152 Wn.2d 171 (2004).
• Washington applies an objective manifestation test, reading the words the parties actually used rather than the intent either party kept to itself. Keystone, 152 Wn.2d 171 (2004).
• A written agreement for the sale of real property must contain a legal description of the land. In Key Design Inc. v. Moser, 138 Wn.2d 875, 983 P.2d 653 (1999), an agreement identifying the property by business name and street address failed the statute of frauds.
• If the letter states in terms which provisions bind (confidentiality, exclusivity, expense allocation, governing law) and which do not, then that question is settled in writing before either side has a reason to argue about it.

Exception: A signed letter that contains every material term, carries a legal description, and includes no language deferring legal obligation can be argued as a contract. Whether that argument succeeds depends on the specific words and the specific facts.

According to RCW 64.04.010, Washington State Legislature, and Keystone Land and Development Co. v. Xerox Corp., 152 Wn.2d 171, 94 P.3d 945 (2004), Washington Supreme Court, as of July 2026.

The word non-binding does a lot of work in these documents and it does not always do the work people think it does. A court reads the whole letter. It’s not the heading that decides the question. It’s whether the words the two of you exchanged show an intention to be bound right now, or an intention to keep talking. I have seen letters where the non-binding sentence sat three paragraphs above a firm commitment to close by a stated date, and the two sentences pointed in opposite directions.

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When does a letter of intent earn its place in a commercial purchase?

A letter of intent earns its place when it fixes the diligence window, the deposit, and exclusivity before either side spends real money. Those three terms drive most of a buyer’s exposure between handshake and closing.

• Environmental diligence carries a federal deadline. Under 40 C.F.R. 312.20(a), all appropriate inquiries must be conducted within one year before the date of acquisition.
• Under 40 C.F.R. 312.20(b), interviews with past and present owners, operators, and occupants, searches for recorded environmental cleanup liens, reviews of federal, tribal, state, and local government records, and visual inspections of the property and adjoining properties must be conducted or updated within 180 days before the acquisition date.
• The EPA recognizes ASTM E1527-21 as a way to satisfy all appropriate inquiries for the innocent landowner, contiguous property owner, and bona fide prospective purchaser protections under CERCLA (Brownfields All Appropriate Inquiries, U.S. Environmental Protection Agency).
• Under RCW 64.04.005(1), a liquidated damages or earnest money forfeiture provision written as the seller’s sole and exclusive remedy is valid regardless of whether the seller suffers actual damages, and may not exceed five percent of the purchase price.
• RCW 64.04.005(3) provides that the section does not prohibit or supersede the common law for provisions above five percent, so a deposit set higher than that line is analyzed outside the statute.
• If the seller is asking for exclusivity, then the length of the no-shop period and the length of the diligence period need to match, because a buyer paying for a Phase I under a shorter no-shop is funding a report the seller can shop.

Exception: A buyer working against a lender’s commitment expiry or an exchange intermediary’s deadline has to set the diligence window against those dates rather than against a habitual thirty or forty five day figure.

According to 40 C.F.R. 312.20, U.S. Environmental Protection Agency, as of July 2026.

The costs start before the purchase agreement exists. A Phase I, a survey, a lender’s appraisal, a zoning review, and counsel time all get spent inside the diligence window, and all of it is spent on a property you do not own yet. What this means: the letter of intent is where you decide how much of that money you are willing to put at risk and for how long, and it is a much cheaper place to have that argument than a purchase agreement is.

Our team handles this stage of the transaction through purchase and sale representation in Seattle.

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What belongs in a Washington commercial property letter of intent?

A usable letter names the parties, identifies the property, states the price, the deposit and when it stops being refundable, the diligence period, and the target closing date, and it separates the provisions that bind from the provisions that do not.

Exception: Sale-leasebacks and ground leases change what the deposit and diligence provisions are doing, and a property with a tenant holding a right of first refusal needs that right addressed in the letter, because the notice timing drives the schedule.

According to RCW 64.04.005, Washington State Legislature, as of July 2026.

The property description is the line people skip. A street address feels like enough because everyone standing in the room knows which building is being discussed. There is no such thing as a real estate agreement that survives on shared understanding, though, and Washington has been clear about that for a long time. Pulling the legal description off the recorded deed at letter of intent stage costs an afternoon. Discovering that it was never in the file costs a closing.

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What happens if the parties disagree about whether the letter bound them?

The disagreement is resolved by a court reading the document, and a buyer who records a lis pendens to hold the property while that happens takes on statutory exposure of its own.

• Under RCW 4.28.328(2), a claimant who files a lis pendens in an action not affecting title to the property is liable to a prevailing aggrieved party for actual damages caused by the filing and for reasonable attorneys’ fees incurred in canceling it.
• Under RCW 4.28.328(3), unless the claimant establishes substantial justification for the filing, the claimant is liable to an aggrieved party who prevails in defense of the action for actual damages and, at the court’s discretion, reasonable attorneys’ fees and costs incurred in defending it.
• In Keystone, the buyer recorded a lis pendens against the seller’s facility and faced a counterclaim for damages arising from that filing. Keystone Land and Development Co. v. Xerox Corp., 152 Wn.2d 171, 94 P.3d 945 (2004).
• If the letter separates binding from non-binding provisions in terms, then the dispute narrows to the binding list rather than opening the whole document to interpretation.
• We typically see these disagreements surface at the moment the seller signs with someone else, which is the point at which the buyer’s spent diligence costs become the real subject of the argument.

Exception: Nothing here says a buyer with a real claim should stand down. It says the recording decision carries its own exposure analysis, separate from the strength of the contract claim itself.

According to RCW 4.28.328, Washington State Legislature, as of July 2026.

A signed letter of intent is not a magic wand, and nor is a lis pendens. Both are documents that describe a position, and both get read by someone who was not in the room when the deal was discussed. The buyers who come out of these disputes in reasonable shape are usually the ones whose letter said plainly what it meant, not the ones who wrote it loosely and hoped the looseness would run their way later.

We work through these transactions and disputes across the region, including King County commercial real estate matters.

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