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Existing Cell Tower Leases are Gold Mines: How to Keep the Mine and Get the Gold

September 5, 2012

Existing cell tower leases are gold mines for the landowner who granted the lease. As telecommunications attorneys representing property owners across the country on such leases, we often find they have given away the gold mine. Below are simple suggestions to help property owners mine the gold in a cell tower lease. If you’re looking to keep the gold, we recommend exploring our complete collection of cell tower advisories.

But first, why are they a gold mine?

Because it costs the cell company more than $250,000 to replace a cell tower with a new one at a different site, the company will pay handsomely to stay put. The new tower has to be very close to the old one to avoid “gaps” in the cell company’s network, which means a replacement site may not be available — at a reasonable cost or at all.

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 and doubling, tripling or even quadrupling the rent the property owner gets. The result? Even though a lease may say the cell company can cancel at any time, it realistically can’t.

Needless to say, an existing cell tower lease is extremely valuable. If it is not sold for several hundred thousand dollars — nearly 19 times annual revenues in 2021 — it is often held on to and accumulates greater monetary value over time. To realize such sums, we’ve developed a few best practices:

  • Don’t extend the term of the lease. Property owners can get large amounts of money when the lease comes up for renewal by 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 that harm the property owner’s ability to sell the lease or its property. Property owners are often asked to amend cell tower leases, typically 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 (also known as the “parent parcel” on a small portion of which the tower is located).
  • Agree to amendments allowing changes in the antennas and towers, but only for those changes specifically set forth and detailed in engineering drawings attached to the amendment. Get a substantial (30 to 100 percent 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 ensure the tenant reimburses 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. More often than not, the tower is used for commercial purposes. Because towers often need upgrades, property owners can get large rent increases in exchange for specific amendments (see previous item). 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 the cell company has too many towers and may cancel the lease. In fact, most companies are doubling the number of cell towers over the next few years. And as mentioned above, towers can’t be moved.
  • Ensure proposed amendments to an existing cell tower lease are reviewed by attorneys or consultants specializing in such matters before you sign it. This often leads to one of two results: 
    • Significant improvements in both the rent being received and 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.
  • 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 percent) of the income from the tower as its fee. If you do decide to sell a lease, have a cell tower professional help you auction it off. There can easily be 10 to 15 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 and can seriously harm the use, development and value of the property with the lease. 

In short, be very careful with existing cell tower leases — they truly can be gold mines — and weary of “claim jumpers” hoping to use lease amendments to take mines away from property owners.

Varnum represents clients nationwide on cell tower leases, including on the sale of over 100 cell leases. If you would like to discuss an initial cell lease or retention, sale or renewal of an existing lease, please contact John Pestle or Peter Schmidt.

John Pestle is a telecommunications attorney who, for decades, has represented property owners, including municipalities, on cell tower leases and sales. He is a graduate of Harvard, Yale and the University of Michigan Law School and held an FCC license to work on radio, TV and ship radar transmitters.

Pete Schmidt is a real estate attorney who has represented clients on numerous cell lease sales, including the Detroit Public Schools on the sale of approximately 24 leases. He is a graduate of Albion College and the University of Wisconsin Law School.

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