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You Own Property with a Cell Lease: Here’s What You Should Know

December 8, 2021

You own property with a cell lease. Congratulations! Based on four decades of combined experience representing property owners on cell leases, here are some thoughts that may be helpful. A previous post detailed buying property with a cell lease. This post addresses owning property with a cell lease, and the following will cover maximizing sale of property with a cell lease. The complete collection of our cell tower lease advisories can be viewed here.

First, be sure to have a solid understanding of how much this asset is worth. At a typical monthly rental of $2,500 and current sales prices of approximately 19 times annual revenues, a lease and future leasing rights can sell for nearly half a million dollars. Treat the lease as a respected, valuable asset.

Second, reject any overtures about the rent needing to be reduced because “the cell phone company has too many towers in the area.” We have never seen this be true. The salespeople making such pitches are paid on commission and typically know nothing about your specific lease. On one occasion, we were in negotiations with cell phone companies for major expansions of cell leases when our client received one of these “rent reduction” phone calls. The real representative of the cell phone company laughed and said to ignore it. Good advice.

Third, go out with a tape measure and camera to measure and take photographs of the site. Repeat this each year. Does the site as built conform to the legal description in the drawings attached to the lease? Often it does not, as it may be larger or in the wrong place. Have changes been made without your approval? Does it contain equipment that should not be there, such as a generator? If any of these occur, you can usually get significant increases in past and future rents for overbuilding.

Fourth, don’t renew your lease too early. You may get calls five, 10 or even 15 years before your lease expires saying the cell phone company must get a renewal to be assured it’s worthwhile to improve the equipment on the site. Baloney! Cell companies usually do their improvements on an areawide basis. They’re not going to leave your tower with 3G service when everybody around it has 5G because this would leave a hole in their network. Be aware that cell leases almost always get renewed. The cell phone companies know this and are not worried your lease is getting near expiration. They don’t want to lose the site and know you don’t want to either. You will generally find that offers on rent and terms improve significantly as you get within two years of the expiration date. We suggest looking at renewal seriously one year to 18 months out.

In short, the most basic point is that most people contacting you about cell leases are usually selling one thing — fear with a capital F — to scare you into doing something you shouldn’t. They are not an employee of the tenant under your lease but rather a third party working on commission. Don’t be afraid.

Cell leases get renewed and despite 5G, cell companies are continuing to add and expand conventional cell towers and rooftop antennas. We’ll explain why in a future post.

Varnum represents clients nationwide on cell leases. If a cell lease retention, sale or renewal is something you would like to discuss, 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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