What Should a Landowner Focus On When Negotiating New Cell Tower Lease?

cell-phone-tower[1]If a landowner decides to move forward with a cell tower lease transaction, the following are the primary areas of such transaction he or she should focus on:

  1. Rent– Rent offered for a cell tower will be based on numerous and varying dynamics.  The most important factors are: a) Space requirements of a cell phone carrier or tower company to install its equipment, and a) the overall utility and functionality of the cell tower location to that cell phone carrier or tower. The amount of space (either ground or rooftop) will be dependent upon the type of equipment to be located on a property.  The cell tower company will not only be looking for enough space to install its equipment but enough space to accommodate potential subtenants/co-locators. This will typically mean that a cell tower company will need anywhere from 500-5,000 square feet or ground area on a tower installation and can need as little as 100 square feet on a rooftop installation. However, contrary to other commercial leases a property owner may be familiar with, the amount of space needed is not the most crucial component in the value of a site to a cell phone carrier or tower company and a result rent is not directly tied into the amount of space required. We take pride in being able to assist you in determining the answer to this crucial piece to the cell tower site puzzle.
  2. Co-Location Fees and Sublease– Cell phone carriers build cell towers for functionality but a cell tower company builds cell towers for their revenue potential only. Just think of a cell tower as a strip mall in the sky. As a result, a landowner should share in this revenue shouldn’t they? In addition to the monthly base cell tower lease rents, a landowner should also be aware of the potential to garner certain additional rent from revenue sharing with the tenant. It is advantageous for a property owner to accurately determine what options a cell phone carrier or tower company may have and more importantly what value the site will ultimately garner for the tenant in the form of revenue during the term of the lease. Vertical Consultants has decades of experience in the industry that allows us to accurately determine what options a cell phone carrier or tower company may have and more importantly what utility the site will ultimately garner for the tenant. This knowledge will assist a property owner in obtaining the favorable terms in any lease negotiation, including, but not being limited to, its ability to request revenue sharing from a tenant.
  3. Cell Tower Lease Term and Commencement– A landowner is usually asked to make a long term commitment when it comes to leasing a portion of its property to a cell phone carrier or tower company. The typical cell tower lease has an initial term of five (5) years, with between three (3) to five (5) successive options for renewal terms at the sole option of the tenant. The reasoning behind the long term nature of the cell tower lease is due to the costs involved in not only installing the tower and other equipment installed at that location but in the necessary improvements at the site itself. This can cost hundreds of thousands of dollars.  Therefore, a cell tower carrier or tower company must occupy and use the cell tower site long enough to be able to recover a reasonable amount of their invested money.  Because of the time and money involved, a cell phone carrier or tower company will never grant the property owner a broad right to terminate at the end of a lease term or renewal, or to otherwise bar the carrier’s or tower company’s right to renew.  While this does in some ways limit the property owner in its control of the cell tower location, as it relates to the term of the lease, this can prove to be a positive for the property owner as well.  For the most part, due to the tenant’s investment in the site it, will serve as some form of security in the long term source of revenue that will be received by the property owner. We can work on the property owners behalf to structure a cell tower or roof top lease that allows the property owner not only the most flexibility when it comes to the term of a lease but also making sure the property owner receives “true value” for the tenant’s occupancy and use the tower site during such term.
  4. Lease Termination– Well as mentioned above a cell tower company or cell phone carrier is making a large investment in a property and needs a long term commitment so why does that same company insist in having a right to terminate a lease on short notice. A property owner will commonly notice that a cell phone carrier or tower company will seek an early termination clause in a cell tower lease with as little as thirty (30) days prior written notice.  The reason for this early termination clause is that the carrier must be able to terminate if a cell tower location becomes unusable because of technology problems, or if it loses its license or permit to operate, or, more importantly, it finds the tower site unsuitable due to changes in  economic conditions. We can work on a property owner’s behalf to eliminate some of these reasons altogether or at least increasing the notice period for termination under these circumstances. Moreover, we have been successful in the past in negotiating lease terms in which the cell phone carrier/tower will agree to some form of termination fees in exchange for the right to terminate the cell tower lease before it reaches expiration.

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