The future of cell tower lease agreements may be changing – and not in the interest of property owners. For a long time, these agreements between property owners and wireless carriers have operated in a fairly consistent manner: Both parties agree upon the base rent for the first year as well as annual rent increases for the term of the contract, usually 30-50 years. Sometimes – but not always – additional revenue is available if the carrier sub-leases the tower to additional carriers. Overall, the agreements have benefited both parties. Carriers could extend their networks while property owners enjoyed an additional source of income.
According to a major tower portfolio manager I met with, the carriers appear to be working to shift the structure of these agreements. Unfortunately, I do not believe this evolution will benefit property owners.
Let me share a recent experience with one of my clients, a property owner who has an existing cell tower lease agreement. This particular client is an elderly woman (early 90s) and her daughter (late 60s) and it is the daughter that is my primary contact. A key reason for the client with entering the original lease was the residual income it produced – intended to help my client with her care needs as she ages. Obviously, protecting and maximizing future income from the lease is a priority for the client.
My client received a proposal from Tower Point Capital (TPC), acting as an agent for Crown Castle (one of the nation’s largest providers of wireless infrastructure), to modify the existing lease on the owner’s property. My client and I sat down together with TPC to discuss this proposal. The TPC rep used high-pressure sales tactics to propose a really awful deal: amend the property owner’s current lease and rent terms with a one-time, lump sum payment amount of almost $52,000 in exchange for extending the lease term by 50 years. Remember how I noted above maximizing future rent is important? This proposal from TPC on behalf of Crown is the equivalent of less than $100 a month in monthly rent payments – would you recommend that your grandparents sign an agreement like this? I couldn’t do so either.
While the lump sum may sound like a lot of money at first, it didn’t even come close to the rental income the property owner is already set up to receive over the course of the existing lease term.
In addition to the bad deal itself, what stood out to me was the high-pressure nature of the discussion. Clearly, the TPC rep was coached and likely following a prepared script. They spoke of industry consolidation and the limited time for the property owner to lock up this opportunity. They said they didn’t want my client running the risk of Crown Castle terminating the lease agreement. Keep in mind, termination is a right that Crown Castle, other wireless infrastructure companies, as well as the carriers already have in these lease agreements. The risk of termination is nothing new. Termination certainly isn’t an increased risk because of the high-pressure scare tactics.
This recent – and what I would call shameful – proposal unveils several implications for property owners to be aware of, as this situation is unlikely to be unique to my client.
- It’s clear the wireless carriers are trying to streamline their cell tower lease agreements through a small group of intermediaries rather than many individual property owners. This part makes sense and doesn’t necessarily pose a problem for property owners.
- Whether you’re negotiating directly with the carrier or with an intermediary (such as TPC), the problem lies in the desired shift in the business model of the lease agreements. For property owners who already have an existing contract, there is simply no incentive to take this “deal.” Okay, maybe if you’ve suddenly racked up a huge gambling debt, and you have to pay it off pronto… then maybe this “deal” would work for you. Otherwise, don’t fall for the high-pressure scare tactics. It’s unlikely the leaseholder will terminate early. Installing a new tower costs hundreds of thousands of dollars plus time, permits, etc. Ride out your existing contract and continue to enjoy the annual revenue stream.
- For property owners without an existing lease, it’s in your best interest to negotiate toward the traditional model rather than a lower one-time, lump sum. Remember, the carriers identified your property as a prime location for a reason. They can’t force you to lease your property for free. The tower companies and carriers are all for-profit companies. Their goal is to pay you as little as possible to strike the deal so that they can preserve the rest of the funds for their own shareholders. You don’t owe them anything, so don’t be afraid to play hardball with them at the negotiation table.
It’s critical that your cell tower lease agreement be handled properly. Otherwise, you run the risk of leaving tens of thousands of dollars on the table over the life of the lease. An experienced attorney who specializes in cell tower leases and broader communications infrastructure matters is well equipped to negotiate on your behalf for the best financial and contractual outcome.
Have you been approached about changing your existing cell tower lease agreement or about consenting to some modifications or upgrades at the site? Do you have questions about a proposed lease? InTownLegal can help. We provide agile, creative solutions to solve your legal needs at the speed of business.
LAWYERLY DISCLAIMER: This post should not be construed as exhaustive or as legal advice. You need to hire legal counsel for that!