The answer is much different depending on whether this is (a) a new lease or (b) a renewal or extension of an existing lease. If it is a renewal or extension then the rental rate should be much higher. That's because if the lease is not renewed/extended, to maintain service in the area the cell company will have to replace it with a new tower. And it typically costs at least $250,000 to find and lease a nearby location, build a new cell tower, tear down the old one, and move all the equipment over. The cost is much more if it is a tall tower or has multiple providers on it.  So with a cell tower lease renewal (or an extension, which is the same thing) the property owner may be looking at a multiple of the rates discussed below. Of course, this assumes there are no problems in the existing lease that would make this inappropriate.

First, how attractive is the site? A dense residential area or commercial area with a lot of people with cell phones is a very attractive area. A rural area with fewer people is much less attractive. Similarly, cell towers located near thruways are attractive as well, because they provide coverage for the traffic on the thruway.

Second, what are the alternative sites for the cell company? If this is a commercial area with many landlords competing to get the rent from a cell antenna on their property, then there is a lot of competition and the rent will be less. Rural areas are similar because usually they are many nearby properties available for rent at a lower rate. But if this is a residential area or other area where it would be very difficult to put in a new cell tower – then the rent should be much higher. 

Third, is this a lease (a) for a cell tower, or instead (b) adding antennas to an existing building (or other structure, such as a billboard, light pole, etc.)? The rental rate is higher for leases to add antennas to an existing building or structure because the cell company doesn't have to spend one or two hundred thousand dollars to build a cell tower.

Putting this all together, a lease to add antennas to the roof of a church, hospital or school which is the only non-residential building in a dense residential area can command a high rent.

So what are the dollars we're talking about? Two years ago, we conducted the only national survey of cell tower rental rates. This showed that about half or two thirds of recently signed new leases (not renewals) had rental rates in the range from $1,500 to $2,500 per month range.  The numbers today will be higher. Suburban or urban areas will have higher rates. Rural areas will have lower rates. And property owners with several cell towers command higher rates.

These are some of the principal factors that affect cell tower lease rental rates. Of course, on the other side of the coin, property owners have to address the risks that cell tower leases can create, both in terms of potentially restricting the use or development of their property and in terms of liability, but those risks are a story for another day.

Generally, four things drive the price for a cell tower lease

Location: Is this a rural location where there are multiple sites for a cell tower and landowners are willing to lease land at low rates? Or an urban setting or college town with high demand for wireless services but limited locations to put an antenna? Or a suburban location with medium demand but almost no locations for cell towers? Prices are higher in the latter two cases (high wireless demand and scarcity of locations). 

Number of years remaining on the lease: Cell phone companies are to a certain extent "over a barrel" if a lease is near expiration because it will cost them $250,000 or more to find a nearby site for a tower, lease it, permit it, zone it, build it, and then take down the old tower. They have to do this to prevent a gap in service. Thus, a lease that is one year from final expiration is worth far more than one that has fifteen years to go. And the key here is the FINAL expiration of the lease - - although leases normally renew in five-year increments, for the reason just noted the cell company effectively can't cancel a lease. They have to renew it.

Current rent that is being paid: If the buy-out price is just one lump sum payment to the landlord, then a tower with multiple tenants collectively paying the landlord $3,000 per month is worth far more than one with a single lease paying $500.00 per month. This is less of a factor if the landowner gets to keep all the rents until the current leases expire (such that the buy-out company is mainly buying the revenue stream after the current leases expire and from new providers who go on the tower).

Number of providers on the tower now (collocators) or who could go on the tower in the future: A tower with three companies on the tower is worth more than one with only one. Similarly, the potential for even more cell companies to put their antennas on the tower also drives up the price. This is especially important in urban and suburban areas with few sites for new towers. Part of what buyout companies are banking on are changes in Federal law which limit local zoning or other problems if they increase the height of an existing tower or make other changes so as to "collocate" additional providers. Landowners should be aware of this, even though the law may be challenged.

Buy-out companies basically make money by buying leases cheaply and then charging a large amount to cell companies to use the tower. Buy low, sell high. So (surprise!) their initial offers to landowners are quite low. As a rule of thumb, landowners should probably view buy-out offers at a "cap rate" of less than 10 or 11 times the annual revenues they are currently receiving or for less than $150,000 as being "low ball offers" that should be rejected. Usually buyout prices should be well above these figures. The good news for landowners is that bargaining or getting an auction process going (where multiple buyout companies are bidding on the tower) usually drives up the price substantially.

Finally, landowners can and should insist that their legal fees get reimbursed as a part of any sale. This is in addition to the buyout price and is really important because the buy-out price is only half the battle -- the terms and commitments in the buyout company's proposed documents to purchase a lease are often too one-sided against the landowner and need to be corrected. A typical example occurs where the buy-out company purchases all the rights to put towers on some land BUT leaves the landlord as the "owner" of the property. Thus the landlord will generally be sued if anyone is hurt by the tower - -  but the insurance, indemnity and related provisions in buyout companies' proposed documents can be inadequate to protect the landowner in the event of such a suit. The landowner could have to spend tens of thousands of dollars on legal fees defending a suit, and more if it loses. 

This is one example of why knowledgeable landowners spend several thousand dollars on legal fees to revise the buyout documents so they are fairer and the landowner is not unduly exposed to liability and why they insist that their legal fees get reimbursed. 

Finally, landowners should make sure they have a lawyer review the FIRST document they sign about a buyout, even if it appears to be an informal "letter" or "letter of intent" because it could bind a landowner to terms that are too one-sided.

In short, the letter is asking that you waive or confirm that there are no defaults or other problems with your lease.

The letter may look innocuous, but be cautious. Check with your attorney first.

The current (September - December, 2012) issue of Municipal Lawyer magazine, published by the International Municipal Lawyer's Association for its lawyer members, has a detailed legal analysis which we wrote about why Section 6409(a)/ 47 U.S.C. § 1455(a) is unconstitutional.

Read the article in its entirety: Section 6409(a) of the Middle Class Tax Relief Act is Unconstitutional

What's key is that much of the increased demand is in residential areas, and homeowners generally don't like having a cell tower in their neighborhood.  But churches often are in or near residential areas, so adding a cell antenna there is a good solution.  It's even better if, as is often the case, the antenna can be concealed or "camouflaged" in the steeple or on the building or church grounds.

As a lawyer for churches on cell tower leases, and as the chair of the Finance Team of a church, here are some practical points churches should consider if they are approached about a cell tower lease, amendment or buyout. Most of these points apply to anyone who is approached about such documents.

1. Bargain Hard. Cell leases are negotiable, both on rent and on terms.  Don’t take the first or second offer, but negotiate for what you need to protect your church.
2. Rent. Cell companies keep lease rates confidential, but often rates are in the $1,500 to $2,500 a month range, higher in desirable areas. 
3. Collocation. Make sure the church gets the rent if a second or third cell company puts its antennas on church property.  This is often overlooked, but can double, triple, etc. the rent the church receives.
4. Taxes. Check out whether the church will have to pay income tax on the rent it gets, or whether it may lose other tax exemptions.  For example, if it now has to pay real estate taxes, make sure they're reimbursed by the cell company.
5. Camouflaging. Cell antennas can be so well camouflaged that you can't tell they are there, particularly if they are in a steeple, behind a parapet wall or made part of the architecture of a church. Consider this, or an antenna being placed in a sign or on what appears to be a tree.
6. Neighbors. What will the church's neighbors think?  Some people don't like cell antennas nearby at all. Others will prefer a camouflaged antenna on a church to an obtrusive cell tower elsewhere. 
7. Don't Mortgage the Church's Future. Cell leases typically make the cell company's use of church property primary and church use secondary. This is often hidden in the fine print. Such terms can limit or prohibit future expansions or changes that are needed for the church to fulfill its mission. Buyouts (see below) are even worse on this. Make sure such terms are stricken or changed so church use is primary and the "tail does not wag the dog."
8. Lender Approval. If a church has a mortgage, typically the lender will have to approve the lease.  Investigate this first.  If the lender vetoes the deal or demands extensive changes it's usually because the terms were harmful to both the church and lender.  Make sure the cell company covers the church's costs if its lawyer has to revise or redo the lease to get lender approval. 
9. Okay to Walk Away. Sometime it's best to walk away from a deal.  We've had clients do that on cell leases where even though the rent would have been nice, the lease posed too many threats and restrictions to the client's primary mission or business.
10. Insurance, Indemnities. These are highly technical, but they make sure that the church is protected if things go wrong during the many decades a lease can last.  Good provisions are usually a page or two long, while the initial language from a cell company is usually only a sentence or two.
11. Legal Fees Reimbursed. Cell leases are specialized documents, usually 15-20 pages long, where the fine print can have unpleasant surprises.  Make sure a lawyer who works on real estate or cell tower matters reviews a lease - - with the cell company reimbursing all legal fees.  Often the lawyer can increase the rent and reimbursements a church gets.
12. Amendments Need Legal Review. Churches with cell leases get many requests for amendments, changes and the like.  Most of them make major changes that harm the church.  Usually these are hidden in the fine print or aren't mentioned in the cover letter.  To avoid harm follow the simple rule - - "No amendments without legal review, reimbursed by the cell company."
13. Buyouts, Easements. Churches get offers to "buy out" existing leases as well as all the leasing rights for church property.  In brief - - such buyout offers:
    1. usually cost churches money (compared to the revenues they would otherwise have received),
    2. are much riskier than cell leases, and
    3. can truly can lead to churches "mortgaging their future". Be very cautious and skeptical about such buyouts and don't agree to them without detailed legal advice
14. Get Advice Before Signing. It's disheartening when I have to tell a church or other property owner that the lease or amendment they signed wasn't the best and unduly puts them at risk, provides for too low a rent or takes away rights.  Make sure you get advice BEFORE you sign a lease, preferably before you start negotiations.

We are often asked about buyouts and believe property owners should keep three things in mind:

First, is the buyout price a good deal financially? The answer is almost always "No" at the price initially offered. That first offer is a low ball offer and can be increased substantially by hard negotiating or by getting a bidding war going (soliciting competing bids). But there is a bigger issue: Financially property owners can almost always do better on their own simply because the buyout companies take such a large slice (30% to 50%) of the gross revenues from the site. Realistically, this assumes the property owner has some degree of business knowledge and is willing to hire knowledgeable lawyers or consultants for assistance. Cell tower leases are sufficiently different from standard real estate transactions that someone specializing in them is needed. The hourly charges for this assistance are small compared to the share a buyout company would take. These charges can be reimbursed, as mentioned below.

We see situations where either the property owner does not have - - or their children or business associates don't have - - the business knowledge or energy to delve into this specialized area of cell tower leases. Or the lease and buyout are just too much of a distraction from the main businesses of the people involved. In these situations, selling off the lease and getting a large chunk of cash to invest makes sense. 

The second thing to keep in mind is that from a property owner's perspective the buyout documents they're offered are - - in a word - - "terrible." One-sided does not begin to describe them. In fact, we recommend that BEFORE making a "sales" decision in principle, a property owner should ask for copies of the documents they will be asked to sign. And then they should have a lawyer review them so they can see all the downsides involved. The downsides typically are many and steep - -  for example, severe restrictions on the property owner's right to use its remaining lands, reductions in the sales price of the property owner's remaining property by 20% due to grants of rights of first refusal to the buyout company, grossly inadequate insurance provisions, and so on.

Obviously, some of these provisions can be negotiated, but seeing their nature and extent up front is often a sobering wakeup call.

The third point is that if there is a buyout, the property owner's legal fees can be reimbursed. The property owner has to ask for it, and buyout companies are hungry enough for these projects that they will agree. So if property owners decide to proceed with a buyout, they should have a knowledgeable real estate lawyer or cell tower lawyer represent them. The lawyer will negotiate the numerous revisions needed to the forms offered by buyout companies, often increasing the sales price and getting legal fees reimbursed. This will make the documents more fair, reasonable, and protective of the property owner, essentially without charge.

If you are approached about a cell tower lease buyout, keep the preceding three points in mind.

As a telecommunications attorney representing property owners across the country on such leases, I often find that they have given away the gold mine.  Here are some simple suggestions for property owners so that they can mine the gold in a cell tower lease.

But first, why are they a gold mine?

• Because it costs the cell company over $250,000 to replace a cell tower with a new one at a different site, the company will to pay a lot of money to stay put.
• There may not be a replacement site available, either at all or at a reasonable cost.  That's because the new tower has to be very close to the old one so as not to have a "gap" in the cell company's network.
• And big money comes because other cell companies will pay large rents to be the second, third or fourth antenna on an existing tower, thus avoiding the cost and difficulty of building their own tower.  This can double, triple, etc. the rent the property owner gets.
• The result - - even though a lease may say that the cell company can cancel it at any time - - in reality it can't, it is locked in like a barnacle to its rock.

So an existing cell tower lease is extremely valuable.  They often can be sold for several hundred thousand dollars -- or held on to in which case over time the property owner will get much more money.  But to realize these sums, here are some do's and don'ts:

• Don't extend the term of the lease.  Property owners can get large amounts of money when the lease comes up for renewal, in return for allowing the tower and antennas to stay where they are.  Extending the term of the lease removes this potential.
• Don't agree to lease amendments which harm the property owner's ability to sell the lease or sell its property.  Property owners are often asked to amend cell tower leases.  This request often comes in form letters from California or Massachusetts companies hired by the cell company. Don't sign the amendment!  The fine print almost always contains provisions which either prohibit the property owner from selling the lease or significantly reduce the sale price of the property owner's main piece of land (the "parent parcel" on a small portion of which the tower is located).
• Do agree to amendments allowing changes in the antennas and towers - - but only for those changes specifically set forth in detail in engineering drawings attached to the amendment.  Get a substantial (30% to 100% or more) increase in rent in return, often proportional to the increase in number of antennas or space being used.  Nix any terms harming the value of the lease and have the tenant reimburse your legal fees.
• Don't allow the main lessee to sublease the tower to other providers.  Such subleases can often double or triple the rent from the main lessee.  The property owner should be getting this additional revenue.
• Don't agree to amendments that in general terms allow the cell phone company to modify, expand, or upgrade its installation, even if they ostensibly claim this is needed for 911 purposes.  99.99% of the time the tower is used for commercial purposes, not for 911 calls.  Because towers often need upgrades, property owners can get large rent increases (see previous item) in exchange for specific amendments.  Granting a general right to modify or upgrade removes this possibility.
• Don't agree to a reduction in rent (or other changes in lease terms) based on the claim that because "the cell company has too many towers" that without the changes or rent reduction, it may cancel the lease.  In fact, most companies are doubling the number of cell towers in the next few years.  And like the barnacles mentioned above, towers can't be moved.
• Do have any proposed amendment to an existing cell tower lease reviewed by attorneys or consultants specializing in such matters before you sign it.  Often this leads either to:
  • Significant improvements in both the rent being received and in the lease terms, with the cell phone company reimbursing the property owner's legal fees, or
  • Rejection of the amendment, because it harms the property owner.
• Do be skeptical of offers to buy out a lease for what appear to be large sums of money.  Usually the property owner can do better on its own, because the buyout company takes such a large cut (20% to 40%) of the income from the tower as its fee.  If you do decide to sell a lease, have a cell tower professional auction it off (there can easily be 10 to twenty prospective bidders).  Have the actual sale documents reviewed by counsel specializing in these matters, as the documents supplied by the purchaser are usually woefully deficient.  Note that one of the auction terms will be that the purchaser reimburses the seller's legal fees!

So be very careful with existing cell tower leases.  They truly can be gold mines.  But there is a whole industry of "claim jumpers" hoping to use lease amendments to take mines away from property owners.

The decision may be of interest to municipalities in other states, such as where provisions of their franchises which pre-date recent state franchise legislation were abolished.

The decision IS AVAILABLE HERE.  It (1) preserves provisions of pre-2007 franchises different from Michigan's "uniform franchise", such as those relating to PEG channels or requiring a cable company to provide in-kind services (free cable service to city buildings, running a PEG studio) which the 2006 legislation purported to modify and abolish, and (2) restores municipalities ability to deny state "uniform franchise" applications so that they can instead negotiate franchises with different (and presumably more favorable) terms.

The decision came in the City of Detroit's suit against Comcast which challenged portions of Michigan's 2006 video legislation.  We represent the City in this case.

The 2006 legislation, while retaining municipalities as the "franchising authority", had considerably weakened that role by: purporting to require municipalities to use (without modification) a uniform franchise created by the state; giving municipalities only 30 days to approve a franchise proposal; not apparently providing any ability to deny a proposal; deeming "approved" any application not timely acted on; and, modifying existing franchises to conform to the state's uniform franchise.

On these points the decision says "The Court . . . finds invalid on federal preemption grounds the provisions of the Michigan Act addressing the modification of existing franchise agreements and barring enforcement [of] provisions relating to public, government, and education channels...

The Court also finds that the state attorney general has offered a construction of the [Michigan] Act that avoids a conflict with the state constitution, that is, that municipalities may refuse to approve a franchise renewal application and negotiate acceptable terms with the cable provider, without the [state uniform franchise]  automatically taking effect."
 

In general, say "no" to these requests.  The reason is that the changes are harmful - -  sometimes very harmful - - to the property owner. 

For example, some of the changes we have seen would:

• Allow the cell phone company to make any changes it wants to its antennas or facilities on the property or buildings without the property owner's permission.  This includes moving the tower to a different part of the property altogether!
• Give the cell phone company a right of first refusal to buy the property when it is sold – this typically reduces what the property is worth by 10 to 30 percent. 
• Prevent the property owner from selling the lease to companies that know what they are doing and can get much better lease rent and terms from the cell phone company.

In addition, the changes are so extreme that they may violate the terms of the property owner's mortgage - - or make future refinancing or mortgages impossible.  This can hurt the sale price of the property by making it hard for a buyer to get a mortgage.

Adding insult to injury, any rent increases offered for these changes is minimal.  In fact, often rent reductions are requested based on the claim that the cell phone company has too many towers in the area, and that unless concessions are granted, the cell tower may go away. 

Such claims are generally spurious.  Cell phone companies are telling the Federal government the opposite – namely, that demand for cell phone capacity is exploding; that cell phone towers must double or triple to meet this demand; and the Feds must thus preempt state laws, local laws, and other restrictions which might slow this expansion.

So view requests for lease changes, especially those from "Lease Optimization" companies with skepticism.  If  you're tempted to sign, get professional advice before agreeing.

To explain – the Supreme Court has rejected as unconstitutional Federal statutes which "blur the lines of political accountability" by directing local officials to take actions for which the Feds are really responsible.  Section 6409(a) runs squarely afoul of that prohibition.

Think about it:  The statute requires local officials to "approve" qualifying collocation applications.  As the Supreme Court has stated, that results in local officials taking the heat for which Congress is really responsible.  Stated another way, Congress devised the statute so that to the ordinary person zoning approval of an egregious cell tower collocation application would appear to be the result of local action, with local officials bearing the political consequences.  But in fact it is Congress and the Federal government pulling the strings, but effectively trying to avoid responsibility.

There are other reasons for doubting the constitutionality of Section 6409(a), such as basic principles of federalism.  But its' impermissibly blurring the lines of political accountability is one of the clearest and easiest to understand.

See the attached five page legal paper for a detailed discussion of why Section 6409(a) is unconstitutional.