When you sell a cell lease, in addition to assigning the lease and rents to the purchaser, you also sell the purchaser the right to put communications antennas on your property for 50 years or more. Done properly, this can be very advantageous, but if done improperly, the right, coupled with its lengthy term, can be harmful, especially for valuable properties. View our other cell tower lease advisories here.
While the intricacies of such sales should be left to professionals (the sale documents are often 15-20 pages long to protect the property owner), here is a short list of items unique to cell lease sales which property owners should keep in mind. This list is based on years of experience helping clients sell over 100 leases.
- Sell the cell lease first if you will be selling the property with the lease. Recently, leases have sold for around 20 times annual revenues. Done properly, a lease sale will add dollar for dollar to the sales price of the property it’s on.
- Don’t use the documents from the purchaser without extensively revising them (we often toss them out and use our own documents). They are usually so overreaching that using them “as is” can reduce or destroy the value of the property with the lease.
- Include provisions protecting the future use, development and value of the property with the lease.
- Have a relocation provision so you can require the leased area to be moved to another location on the property if needed for the maintenance, repair or redevelopment of the property.
The following items are particularly important for areas where the leased space is on a building rather than for a tower on open land. Buildings are generally much more valuable than open land (so the potential harm from bad terms is greater), there often are two or more parcels being leased (equipment on the ground, antennas on the roof, cables in between) and property owners need to be specific on the rights being sold and retained.
- Clearly describe, with engineering drawings if needed, the areas of the building the purchaser can use.
- Spell out the types of communications uses the purchaser can conduct and the equipment it may place in these areas.
- Also spell out the rights the building owner and tenants retain to use these same areas (as well as other parts of the building) for their antennas, HVAC, elevators, etc.
- Describe the types of communications uses and radios that the building owner, residents and tenants have retained and do not violate the sale.
- Attach engineering drawings showing the equipment currently on the building.
- Require landlord approval of changes to the preceding and the reasons the approval can be withheld.
We’ll be covering these points, and many more, in our November 15 national webinar on cell leasing. For a 50% reduction in the cost of the webinar, use discount code: W8524655 and priority code: 15999. Register online or call 866-352-9539.
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 Detroit Public Schools on the sale of approximately 24 leases. He is a graduate of Albion College and the University of Wisconsin Law School.