Cell Tower Leases: Top Ten Things For Owners to Consider Apr 11, 2022
While often presented as an easy way for a landowner or building owner to make passive income, the lease forms presented by the cell tower company are generally extremely one-sided to the detriment of the property owner.
Commercial cell tower leases often last for many years, even for decades. Our firm has seen leases lasting as long as 50 years, so it’s critical to negotiate and fully understand the terms and conditions of the cell tower lease you’re signing so that your property interests are adequately protected. The goal is to create a leasing arrangement which economically benefits both parties, creates certainty regarding each parties’ rights and obligations, and protects the property rights of the owner.
In addition to the long terms, cell tower leases in Colorado are often long, complicated legal documents, heavily siding in favor of the cell tower company. What is often most important in an initial draft of a cell tower lease is what is missing. Namely, restrictions and responsibilities for the cell tower company.
The following is by no means a complete list of issues for a property owner to consider before entering into a cell tower lease, but it highlights some common points generally missing from the initial draft the cell tower company drops off:
- Easements. Does the cell tower have the right to establish easements on the property? Easements generally relate to the ingress/egress over a property. They are recorded and run with the land. If easements are granted, they should be tied to specific portions of the property directly related to the cell tower location, with maintenance obligations spelled out and an extinguishment at the end of the lease.
- Assignment and Subletting. Can the cell tower company sublease its lease premises to other parties? Do you want to have a say over that? Can the cell tower company assign its rights to another party? Do you want to have a say over who the lease gets assigned to?
- Rent. How is the rent calculated and what is included in the rent? Is there an escalation clause built into the rent?
- Cleanup responsibilities at the end of the term. What obligations does the cell tower company have to remove its cell tower equipment and return your property to the condition it was in prior to the lease?
- Tenant Default. Landlord remedies for the tenant’s default under the lease (often these have to be negotiated as usually none or very limited are present at the outset).
- Access Rights. What access rights are being granted to other portions of your property/building?
- Use Restrictions. What use restrictions does the lease put on your other property/sections of the business?
- Building Plans. It may sound surprising, but often the initial leases are very vague about the cell tower company’s rights to build out their leased premises, with litter or no restrictions put on them.
- Indemnifications. Is the cell tower company willing to protect the property owner for accidents and damages caused by their equipment? It’s likely the initial draft doesn’t include these requirements.
- Security Deposit. Is there one? Wouldn’t you normally require a tenant to put up a security deposit?
Don’t be fooled by the idea of easy, passive income coming from a cell tower lease. Cell tower leasing companies are sophisticated business operations. Their leases are drafted with the cell tower’s best interests in mind. An uninformed, unrepresented property owner can be sorely surprised by the rights he/she gives up to the cell tower company. These are just a few of the key areas that a property owner should consider when negotiating a cell tower lease. We hope these have been helpful.
(Mallon Lonnquist Morris & Watrous, LLC, is a business, employment, real estate, and litigation law firm. Craig T. Watrous is a Colorado real estate attorney and partner at MLMW, based in Denver, Colorado. Craig regularly represents clients on both sides of real estate purchases. Craig can be reached at cwatrous@mlmw-law.com and (303) 722-2165.)