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Beware of Cell Tower “Lease Optimization”

July 23, 2012
Cell Tower Blog Post

Cities, churches and other property owners are getting letters from companies running "Lease Optimization Programs" for the major cell phone companies. They ask for (or in some cases demand) significant changes to their cell tower leases.

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.

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John Pestle has previously co-presented on topics related to cell tower leases and lease buyouts. Those seminars are available for purchase. Current Issues in Cell Tower Leases and Lease Buyouts is available as a CD with a reference manual. Cell Tower Lease Buyouts is available for purchase as an on-demand webinar.
 

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