In cases where the property in question is not listed on a multiple list service, there is no simple way to inform the owner of the property and other interested parties of the intention to purchase. Often it is necessary to officially begin the purchase process, and allow all peripheral stakeholders to start all other processes, with a declaration of intent. For example, a multi-million dollar loan for an industrial property may require a letter of intent before a financial institution allows staff to spend time working on the loan necessary to complete the sale. The same can be followed by any company at the time of purchase. Tenants and landlords can sign a letter of intent before signing a tenancy agreement setting out rental prices and all the terms of the upcoming lease. [Citation required] In principle, a Memorandum of Understanding can be used for all types of agreements, but some are more common than others. The declaration of intent is the most common before a cooperation agreement, a sale and sale contract or the transfer of shares to a company whose intention is to perform due diligence first. In a way, a Memorandum of Understanding is an announcement of negotiations. Therefore, you can also use a Memorandum of Understanding as a draft before the final agreement is negotiated. In the event that you are negotiating a major agreement, there may be many small aspects to consider.
In this case, the Memorandum of Understanding serves as the basis for examining the subsidiary aspects during the negotiation. During the negotiations, a declaration of intent would provide you with security that would allow you and your colleague to test each other and reach a final agreement, since you both signed that you are interested in the transaction. Ultimately, the information contained in the Memorandum of Understanding is part of the final sales contract in which the transaction is legally established; It describes what you can talk about outside of these negotiations and what you cannot talk about, and it contains a roadmap that describes how things are going to go. A declaration of intent is a kind of gentlemen`s agreement that shows the seriousness of both parties when concluding a transaction.