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What to Expect in a Cell Tower Lease

What to Expect in a Cell Tower Lease

So you’ve been approached by a wireless carrier and wish to enter a cell tower lease agreement. At this point, you will probably want to have a good idea of what a lease agreement can offer.

Some landlords can be overwhelmed with the technical jargon within a lease, often making hasty decisions that might be detrimental in the long run. Understanding what the lease entails and negotiating can be exhausting and will take time. The following will give you the typical components of a cell tower lease agreement along with the issues that may arise so that you can know all the facts.

The Landlords Rent

First and foremost, landlords usually want to know the amount of rent they will receive for their cell phone tower. However, this amount will vary, as several factors determine the rent price.

Rent prices will depend on your location and how it fares with your competitors, construction costs, and the demand for cell phone coverage in the area. It is also essential to realize short term profit and long term profit are different. Maximizing monthly rent initially may not give you the best most lucrative deal in the long haul.

Duration of the Lease

Cell tower leases can generally begin with five-year terms. If a lease renewal occurs, then another five-year term is given, giving a potential total of 25-30 years. The full duration of 30 years can also be agreed upon at the beginning of the contract, however.

While having an additional five or twenty-five years of rent could sound favorable, there can be contractual implications within these agreements. In an ever growing technological industry, your cell tower can lose value over time, or at worst, no longer be needed by the cell wave carrier.

It is also important to consider inflation and that your money will decrease over time, a fixed rental income may be substantial now, but not in thirty years.

In a cell tower lease, a termination clause offered must be treated with caution. This clause allows wireless carriers to leave the contract early with short notice, leaving their unwanted wireless property on your land. These include existing structures along with cables, fencing, and conduits. The cost of removal is left to the landowner.

Another more problematic pitfall landlords fall into is The Right of First Refusal (ROFR) clause. Wireless carriers occupying a cellphone tower exercising this clause will be allowed to match or exceed offers made by potential buyers. If a new buyer wanted to make an offer for the landlord’s property, land, or wireless lease, it could be exceeded and sold to the wireless carrier in their place. Exceeding buyer offers will dissuade other potential buyers from making an offer, and if demand decreases, so will the number of buyers. Less competition could mean you are not getting the best financial deal possible for your property, land, or wireless lease.

Co-Location and Rooftop Leases

A co-location lease involves a wireless carrier who wants to use a cell tower and its ground space already occupied by an existing carrier.

A co-location fee is negotiated and agreed to by both carriers to sublease part of the cell tower land to the new carrier. Leases of this kind generally do not involve the property owner. The property owner, in this case, would have to be a carrier or tower company.

A rooftop lease similarly occurs when the carrier wants to install its rooftop antenna and other transmission equipment but does not own the structure. Transmission types of equipment include transmitter/receivers, backup power sources, base transceiver station (BTS), and GPS. The owner and carrier will negotiate a lease agreement, allowing the installation to take place.

Cell Tower Lease Buyout

Landlords who are currently in a lease have the choice to sell their cell tower lease. An investor purchasing a cell tower lease can do so by easement or a lease assignment.

When approached by a potential buyer, it is essential to consider the following factors which can impact the current of future lease value. These factors are rent, periodic escalators of rent, collocation, and the date of lease expiration.

The type of cell tower will also affect a lease buyout. A rooftop site buyout, for example, will be different from a cell tower lease buyout located in rural areas. Other cell tower buyout issues are access requirements, tax implications, property redevelopment rights, and property damage made from rooftop installations.

Explanation of Use

The Explanation of Use will discuss and clarify what they intend to do with the property. It will include a description of how the land and rooftop will be utilized, as well as the allowances and limitations given by the landlord.

In a lease agreement, a wireless carrier may take advantage and negotiate more space for their equipment than necessary on your property. Unsightly structures and equipment in unfavorable areas taking too much space can decrease property value. As a landlord, it is essential to put limitations on carrier actions to prevent this from happening.

Cell Tower Lease Recommendation

A cell tower lease can be overwhelming to many property owners due to the many components and potential problems you may encounter.

It can be advantageous, therefore, to research and speak to cell tower consultants in your area. The right consultant can maximize cell tower lease rates while also clarifying you on potential pitfalls, ensuring you get the best possible deal.

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by Brian Perry // Brian Perry is a contributor to Businessing Magazine.

Opinions expressed by contributors are their own.