What is a lease proposal?

Instead of a lease application, a request for proposal (RFP) outlining the need of prospective lessees for the financing of mid- and big-ticket assets is prepared and sent to prospective soliciting a proposal from them to arrange the transaction.  In commercial real estate leasing, an RFP provides information on the prospective tenant’s status and a broad range of business and legal issues and is sent to one or more potential landlords.

A document issued by a potential lessor early in the lease process that sets forth the basic commercial terms and conditions upon which the lessor would be prepared to arrange the proposed lease transaction is a lease proposal.  Lease proposals are prepared by interested lessors in response to requests for proposals and used to express the lessor’s interest in the proposed transaction and to provide a framework for future discussion, with the details of the transaction to follow.  A proposal identifies the parties to the lease and provides a brief description of the leased asset, some financial and performance-related terms and conditions, and other details, such as guarantees and end-of-term options.  A lessor generally does not begin the credit-approval process until the lessee has accepted the general terms of the lease proposal.

A lease proposal typically contains a disclaimer to minimize the risk that it could be deemed a binding legal agreement that is enforceable against the lessor.  The disclaimer commonly states that the proposal is not to be viewed as the lessor’s commitment, its terms are subject to change without notice, that no action should be taken by the prospective lessee in reliance on the proposal, and, if the lease is being marketed through a broker, that the broker has no authority to represent or bind the lessor.