Knowing your client’s balance of power within a new cell tower lease transaction and negotiations is extremely advantageous. It is imperative that you and your client immediately establish bargaining power when your client is asked by a telecom company or tower developer to place their equipment on his or her land.
These companies pursuing your client do so because they see value in yourclient’s land and its capabilities for facilitating the telecom companies’ equipment. What must be determined is the amount of negotiating power within a telecom lease. Cell tower lease negotiations depend on distinctive characteristics of the location involved and the property’s value to the telecom company or tower developer. A few factors can help you determine just how much bargaining power you and your client have within a cell tower lease transaction.
- Do the characteristics of your property or building (such as your building’s height or unique topography attributes) distinguish it from others in the area?
- What options does a cell tower company have as it pertains to other buildings or properties in the area with a similar layout and zoning classifications? and
- Does your property provide sufficient space for a cell tower company to construct a tower and allow for expansion in the future?
A landowner’s bargaining power and leverage in negotiations with a cell tower company is directly related to the options that the company has and the overall value of your potential tower location to that cell phone carrier.
If your client decides to proceed with a cell tower lease transaction the following should be the primary areas of focus:
- Rent – Rent offered for a cell tower will be based on numerous and varying dynamics. Space requirements and overall utility and functionality of a cell tower location to the cell phone carrier or tower developer are important factors, with utility and functionality. A cell tower company will need 500-5,000 square feet or ground area for tower and equipment installation and to accommodate subtenants/co-locators and as little as 100 square feet of rooftop space. Although space is important, cell phone carriers and tower developers rely mostly on the utility and functionality of a site (both of which directly impact cell tower lease rates).
- Co-Location Fees and Sublease – Cell phone carriers build cell towers for functionality while cell tower companies build towers for their revenue potential only. If a cell tower company is making overwhelming profits from the utilization of your client’s property, shouldn’t he or she benefit? In addition to the monthly cell tower lease rents, a landowner should be aware of the potential to garner additional rent in the form of revenue sharing with the tenant. It is important for a property owner to determine a cell phone carrier or tower company’s options and what revenue the site will garner for the tenant during the term of the lease. This knowledge will assist a property owner in obtaining favorable terms in any lease negotiation, including the ability to request revenue sharing from a telecom tenant.
- 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 his or her property to a cell phone carrier or tower company. The typical cell tower lease has an initial term of five years, with three to five 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 the costs of installing the tower and other equipment at that location and necessary improvements at the site, which could equate to hundreds of thousands of dollars. A cell phone 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 property owner will not be granted a broad right of termination at the end of a lease term or renewal, or to bar the carrier’s or tower company’s right to renew. While this, in some ways, limits the property owner’s control of the cell tower location, this can prove to be positive for the property owner as well. The tenant’s investment in the site will serve as some form of security in long-term revenue for a property owner.
- Lease Termination –Finally, 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? Commonly, a cell phone carrier or tower company will seek an early termination clause in a cell tower lease with as little as thirty days prior written notice. The carrier or tower company must be able to terminate if a cell tower location becomes unusable because of technology problems, if it loses its license or permit to operate, or if it finds the tower site unsuitable due to changes in economic conditions.
Having experienced professionals guiding you and your client will allow your client the most flexibility in a cell tower lease and the assurance that he or she receives “true value” for the tenant’s occupancy and use the tower site during such term.
Hugh has over fifteen (15) years legal/telecom experience, including representing AT&T as an attorney for over ten (10) years in that company’s acquisition and disposition of telecommunication sits across North America and abroad. Hugh is the founder and president of Vertical Consultants a telecommunications consulting firm. Vertical Consultants specializes in assisting property owners optimize the value of any proposed or existing cell tower or rooftop lease. Vertical Consultants invites you to learn more at www-vertical-consultants.com. Hugh can be contacted at 877-456-7552.