Considerations for Church Cell Tower Leases
Churches are good candidates for cell towers and antennas. As the Los Angeles Times pointed out in a Christmas Day article (in which I'm quoted) that's because cell companies have to add a lot more cell towers and antennas due to the increased demand caused by the proliferation of Droids, iPhones, iPads, etc.
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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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."
- 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.
- 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.
- 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.
- 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.
- 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."
- 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:
- usually cost churches money (compared to the revenues they would otherwise have received),
- are much riskier than cell leases, and
- 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
- 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.
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.
You May Also Be Interested In
- Cell Tower Blog Post, July 18, 2018
- Cell Tower Blog Post, June 12, 2018
- Webinar: What Property Owners and Managers Need to Know About Cell Tower Leases and the Sale of LeasesCell Tower Blog Post, May 23, 2018