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Cellular Antenna Leases: A Checklist for Landlords

Articles, Leases

A cellular carrier’s lease form or the form of an independent cell site developer (both are referred to as a “carrier”) is prepared by and strongly biased in favor of the carrier. The desire of a landlord to earn easy income from a cell site lease should not cloud reason and the need to modify the carrier’s lease form. The extent of the modifications and concessions obtainable by a landlord depends upon the desirability of the property and alternative sites available to the carrier. But, it’s a balancing act. Landlords who push too hard may lose out to a neighboring property; Landlords who don’t push hard enough may end up with unanticipated and unacceptable expenses, liabilities and burdens.

Carriers require contingency time periods after the agreement is signed to conduct feasibility studies and obtain permits. To accommodate these contingencies, some carriers structure their agreement as an option to lease to be exercised by the carrier once the contingencies have been satisfied. Other carriers simply prepare a lease which contains feasibility and permit contingencies.

Under either structure, the agreement should require the waiver or satisfaction of contingencies prior to a specified outside date. If the carrier does not waive the contingencies by the outside date, the agreement should terminate and be of no further force or effect, except for provisions which survive termination, such as indemnities and covenants to satisfy mechanic’s liens.

There are two types of cellular antennae leases: the first is a rooftop installation; the second is a cell tower installation (constructed directly on your land). While this checklist covers issues applicable to both lease types, some issues may be applicable to rooftop leases and not cell tower leases, and vice versa. Also, although this checklist is thorough, it is not exhaustive and there may be other issues of concern applicable to particular transactions or cell site locations.

Rent and Other Income/Payments

Key Money/Processing Fee

Negotiating a cellular antennae lease can be time consuming and expensive, requiring more time and legal fees than expected for a lease that generates a similar level of income. Because of this, the landlord should ask for key money or a processing fee that is payable concurrently with the execution of the lease agreement.

Feasibility/Permit Contingency Period Compensation

Request compensation for the time period covering the carrier’s feasibility study/permit contingency period.

Monthly Rent

Negotiate a clearly defined rent commencement date and a mechanism for automatic rent increases, preferably on an annual basis.

Co-location Rent

The use of a site by more than one carrier is often referred to as “co-location.” Carriers are not adverse to co-location, but they will negotiate protections so that their signal transmission is not adversely impacted by other carriers’ antennae. Landlords can increase their income stream from co-location by (i) retaining the right to co-locate other carriers on their property, and/or (ii) obligating the carrier to pay landlord a portion of the co-location rent it receives from other carriers.

Utilities

The carrier should install utility meters and pay charges directly to the utility companies. If utilities are not separately metered, the carrier should be obligated to pay for its fair share of utilities.

Pro-rata Share of Operating Expenses

Generally, carriers do not pay a pro rata portion of building or project operating expenses.

Taxes

The carrier should pay personal property taxes and increases in real estate taxes associated with its improvements and installations.

Termination Payment

A negotiated amount paid by the carrier if it exercises a right to terminate granted to it in the lease (See Term – Termination Rights, below). One way to structure the termination payment is as an amount equal to (i) the monthly rent for the remainder of the term, or (ii) the minimum monthly rent for a set number of months, for example a termination payment equal to six months of rent. Landlord can increase the effective amount of the termination payment by requiring a written notice of termination a specified period of time (e.g., 90 days) prior to the effective date of the termination, with the carrier being obligated to pay monthly rent through the termination date.

Leased Premises; Construction; Maintenance; Removal/Restoration

Defining the Leased Premises

Carrier lease forms loosely define the area leased and grant broad discretionary rights to the carrier to modify, alter and expand the leased premises throughout the entire term. It is important for a landlord to rein in and control the carrier by negotiating a precise definition of the premises.

  • Description. Legal Description (cell towers) or diagrams (certain cell towers and roof top leases). Equipment shed location. Size/height restrictions.
  • Design/Camouflage. Requirements, if any, should be agreed upon and documented.
  • Interference with Signals of other Carriers.   (1)  The carrier should agree not to interfere with the radio frequencies of any existing carriers so long as the existing carriers continue to operate within their respective frequencies.  (2)  Landlord should agree not to enter into future leases with carriers whose operations interfere with the carrier’s established radio frequencies. (3)  The carrier should agree to use good faith efforts to resolve interference problems between its transmissions and the transmissions of other carriers.
  • Utility Easements. Rights to run wires, cables and conduit from antennae to a power source should be specified.
  • Backup Batteries.  Are they required? Backup battery systems may contain mercury or other harmful chemicals. The lease should make the carrier responsible for compliance with environmental compliance, notification and remediation laws, rules and regulations.
  •  Access Rights/Easements. Particularly for rooftop antennae, access rights to roof must be documented. Important questions to answer include whether unfettered access will disturb other tenants and whether access should be limited or restricted for non-emergency situations. If landlord requires access nearby the antennae to repair or maintain its building or property, the carrier should be obligated to turn off the antennae to protect workers from the harmful effects of radiation generated by the antennae.
  • Use “for no other purpose”. It is important to specify that the use of the property is for construction and operation of a wireless communications facility, including a tower, antennae, cables and related structures, and for no other purpose.
  • No Exclusive Rights. Landlord should make clear that it has the right to co-locate other carriers on its property. The right of a carrier to co-locate other carriers on its equipment should be coupled with an obligation for the carrier to share co-location rents with the landlord.
  • As-Is. Landlord should not make representations or warranties. (Or, if made, they should be limited in scope and duration).
Permits, Plans and Construction Concerns
  • Permits. The lease should provide that landlord will cooperate with the carrier in its efforts to obtain zoning variances, conditional use permits and construction permits, but such cooperation should (i) be at no cost or expense to the landlord, and (ii) not require landlord to limit its rights to otherwise use or develop the property.
  • Plans and Construction. Certain aspects of the carrier’s plans, including camouflage design, engineering plans the attachment and anchoring of the antennae, and roof and structure penetrations, should be subject to the landlord’s reasonable modification and approval. The carrier must (i) install its equipment in a manner that does not invalidate the landlord’s roof warranty, and (ii) be required to repair of leaks, if any, caused by its installations. The landlord should retain the right to deny its consent, in its sole and absolute discretion, for any improvements or alterations that increase the size or visual impact of the carrier’s improvements.
Maintenance

The lease should clearly provide that the carrier is responsible for the maintenance, repair and replacement of the leased premises and its equipment.

Improvements and Removal

Some carrier lease forms limit removal and restoration obligations to aboveground improvements (excluding structural steel, foundations and underground installations) to the extent “reasonable,” without any obligation to restore damage to landscaping. Upon termination of the Lease, the carrier should agree to (i) remove all of its personal property, trade fixtures and equipment from the premises prior to the expiration of the term, and (ii) restore the leased premises to its original condition, normal wear and tear excepted, at its sole cost.

Term

Feasibility and Permit Contingencies/Rent Commencement

As discussed above, some carriers tie up the cell site locations with an option to lease, which when exercised, triggers the commencement of the term and the monthly rent obligation. Other carriers structure the feasibility study/permit contingency period as part of the lease term. If a lease structure is used, the lease should clearly state when the monthly rent obligation starts, which could be upon issuance of building permits, “x” months following the issuance of building permits, or the commencement of construction.

Duration of Term/Options to Extend

The term of the Lease is typically 5 years, which automatically renews for a specified number additional option terms of 5 years each. The options to extend will be deemed to be automatically exercised unless the carrier notifies the landowner of its intention not to renew prior to the commencement of the succeeding renewal term.

Termination

Carriers require the right to terminate the lease under certain circumstances. Landlords should negotiate a termination payment in the event the carrier exercises a termination right, other than as a result of landlord’s default, interference by other carriers, or damage and destruction of the premises. Generally, the carrier will retain the right to terminate the lease upon: (i) the termination, expiration or withdrawal of licenses, permits, easements or other approvals, (ii) the determination by the carrier, in its sole and absolute discretion, that it is unable to use the site for its intended purpose or that the site is no longer economically viable, (iii) any time prior to commencement of construction, (iv) interference with the transmission of its radio frequencies by other carriers on the property, (v) the premises are damaged or destroyed, or (vi) default by landlord and the failure to cure the default within a specified period of time.

Assignment and Subletting

Assignment and Subletting

Carriers will generally require a right to assign without the landlord’s consent. Carriers will resist any limitation placed on their right to assign because of the administrative burden of complying with consent requirements. The carrier should be required to provide notice of an assignment and remain liable under the lease following an assignment. The assignee should be required to assume, in writing, the carrier’s obligations duties and liabilities under the lease.

Subletting

Similar to assignments, the carrier may require the right to sublease (co-locate other carriers) without landlord’s consent.  See discussions above regarding co-location (Sections I.d and IIa.ix)

Miscellaneous

Compliance with Laws

Clearly provide that the carrier is required to comply with all federal, state and local laws, rules and regulations concerning the carrier’s equipment, antenna and transmissions. Some carrier leases require the landlord, at its cost, to keep its building and property compliant with Federal Aviation Administration (“FAA”) and Federal Communication Commission (“FCC”) for marking, lighting and monitoring. The carrier, not landlord, should be obligated to comply with FAA and FCC requirements triggered by the carrier’s improvements in operations.

Right of First Refusal to Purchase

Some carrier leases contain a right of first refusal provision requiring the landlord to offer to sell its property to the carrier on terms and conditions that the landlord is willing to accept from a third party. For many reasons, such a provision is unreasonable and burdensome and should not be agreed to by landlord.

Rental Stream Offers

There are companies that purchase rental streams from cell site leases at a discount. Carriers require the right to match offers acceptable to the landlord, enabling the carrier to buy down its stream of lease payments at the discount offered by a third party. This is a requirement of most carriers in the landlord should negotiate reasonable time periods and requirements applicable to this right.

Redevelopment and Relocation

In connection with the improvement or (re)development of the landlord’s property, the landlord should have a right to relocate the carrier’s antennae and supporting equipment and facilities to another.  Which party bears the cost of the relocation is subject to negotiation.

Default and Remedies

Carrier forms are notoriously deficient in landlord protective default and remedy provisions. Specific issues related to default and remedies are beyond the scope of this checklist.

Damage and Destruction

Similarly, issues related to damage and destruction are beyond the scope of this checklist.

Insurance; Liability and Indemnification
  •  Insurance. Require the carrier to keep appropriate amounts of insurance for (i) liability arising out of the carrier’s operations and activities on the property, (ii) property damage covering all of the carrier’s improvements and equipment, and (iii) workers’ compensation.
  • Limitation on Landlord’s Liability.
    1. Carrier to Waive Claims for Damage to its Property. The carrier should all waive claims for damage to its property, even if caused by the landlord’s negligence. The risk of loss should be covered by insurance maintained by the carrier.
      • Waiver of Subrogation. The carrier’s insurance company must waive its rights of subrogation. If not waived, the carrier’s insurance company can step into the shoes of the carrier and sue the landlord for property damage claims covered by the insurance company.
    2. Carrier must Waive Rights to Certain Damage Claims. The carrier should waive and landlord shall not be liable for consequential, incidental or special damages. These damage claims should be covered by insurance maintained by the carrier.
  • Indemnification. The carrier should agree to indemnify, hold harmless and defend landlord (and its agents, employees, representatives, and contractors) from and against any and all claims related to any act, omission, or neglect of carrier (and its agents, employees, representatives, and contractors) related to carrier’s use of or activities on or about the site or operation of the facility (including, without limitation, any claims related to radio or electromagnetic fields, radiation, or emissions created by the facility). The indemnification provisions should survive the termination, cancellation, or expiration of the lease.
Prevailing Party Attorneys’ Fees

Landlords should add an attorneys’ fee provision. Carrier forms do not include an attorneys’ fee provision for good reason. Without an attorneys’ fee provision, the cost for a landlord to contest a carrier default will often exceed the landlord’s potential recovery, which will result in most landlords not pursuing claims in court, a clear benefit to the carrier.

Lien-Free Completion of All Work

Carrier should be obligated to pay, when due, all claims for labor or materials furnished the carrier’s behalf and to defend the landlord and its property from and against any such claims. Carrier should provide the landlord not less than 10 days written notice prior to the commencement of any work in, on or about the premises, and landlord shall have the right to post notices of non-responsibility.

Late Charge and Interest on Past-Due Amounts

Provisions for late charges and interest on past amounts should be added to the lease.

If you have any questions or comments, email Rick.

Disclaimer: This article is provided by Angel Law Offices for general education purposes only.  The information should not be relied on as legal advice, nor does it serve to create an attorney-client relationship. Laws vary from one state to another. For legal advice on a specific matter, consult an attorney.