August 11, 2009

Businesses and organizations nationwide are being asked to sign leases to put cell tower and "WiMAX" towers and antennas on their property. Such cell tower type leases pose unique risks and opportunities, with many property owners unwittingly missing opportunities to double or triple the rent they get, or failing to get adequate protections against the business and technological risks involved in such 25 year leases.

Property owners enter into thousands of such leases annually: The cell phone industry adds around 12,000 new antennas per year. In addition, Clearwire and other companies offering WiMAX service require tens of thousands of new towers and antennas in the next two years (WiMAX is a new wireless technology backed by Sprint, Intel, Comcast and others to provide high speed over-the-air Internet service to entire cities and counties. It uses antennas and towers similar to cell phone towers. By 2010 it will be available in over 80 major U.S. metropolitan areas, and many rural areas, or over 40% of the U.S. population).

Property owners can protect themselves by drafting WiMAX and cell tower lease agreements that cover the following:

• Make sure the property owner gets the rent from any additional antennas put on the tower. This can double or triple the initial rent. Not doing this is the most common mistake property owners make.
• Whether WiMAX will be a business success or failure is unclear. Make sure there are comprehensive provisions addressing insurance, indemnity and assignment (only to credit-worthy entities) so the property owner is protected in the event the tower fails and the property owner is the only deep pocket left for injured parties to pursue. Cell phone companies pose similar, if lesser, risks.
• For similar reasons, add provisions so that if the provider files for bankruptcy, it has to immediately either accept the lease and stay in full compliance, or reject it and turn the tower back to the property owner. Otherwise, during a lengthy bankruptcy proceeding the property owner won't get paid rent. Worse, the provider could let the insurance lapse and let the tower fall into disrepair, creating liability risks for the property owner.
• Attach engineering plans, and require the tower, antennas and site to be built exactly per such plans, unless the property owner agrees to the contrary.
• Put provisions in the lease allowing the property owner to relocate the tower or antenna to a different site, so the cell phone or WiMAX tower/antenna does not prevent the owner's future profitable development of the property.

If you have questions about WiMAX or cell tower leases, contact John Pestle, Chair of Varnum's Cable and Telecommunications Group. You may also consult the firm's model cell tower/WiMAX lease, developed for property owners, at www.varnumlaw.com/lease.