Our law firm recently dealt with an interesting issue: an attempted unpaid land grab by a carrier. This is an issue that wireless site landlords should ALWAYS be on the lookout for when reviewing the plans for a proposed site modification. This story deals with a proposed standby power generator.
In the matter we just resolved for our landlord client, the wireless carrier wanted to install a new propane gas powered standby power generator at its cell site on our client’s property.
Standby power generators provide electrical power during commercial power outages, thereby allowing the cell site to operate during a local power outage.
For the most part, that’s a good thing.
The carrier proposed that the 7,500 watt standby power generator; the 120 gallon propane tank; the power transfer switch, etc. all to be placed entirely within the existing leasehold area.
That’s a good thing, too.
When we reviewed the project plans for the landlord, we recommended the landlord DENY the request. The landlord was surprised. All of the proposed modifications were to be entirely within the leasehold area, so on what basis wound he deny the request, he wanted to know.
Well, it turns out that the carrier’s request to modify its site—entirely within its leasehold area, was an attempt to secure a defacto, covert unpaid expansion of the land on the landlord’s property to be controlled by the carrier.
And that’s not a good thing.
What the carrier outright failed to tell the landlord (and only provided a single oblique reference on one panel on a single page of the 11 pages of zoning plans) was that the location of the propane tank triggered a fire safety code ignition clearance zone of 5 feet in all directions around the tank.
To maintain the ignition clearance from all of the existing wireless equipment inside the leasehold, the carrier proposed to place the propane tank against the edge of the leasehold. That meant that the 5 foot clearance zone around the tank would actually extend outside of the leasehold area, thereby restricting and controlling the landlord’s use of his own property.
Figure 1, below, contains a capture of the relevant portion of the plans as proposed by the carrier:
In the next graphic, Figure 2, I’ve animated the plans in Figure 1 to show exactly where the land grab would have occurred had we not detected it:
(Click on the image above to see it in full size and animation.)
Did the carrier, on its own, actually disclose these the relevant facts to the landlord other than via an oblique plan page reference? No.
Did the carrier, on its own, offer any additional rent to the landlord? No.
In the end, did the landlord, once alerted by us the unpleasant reality, agree to permit the defacto unpaid expansion? No.
Having being caught by us, the carrier redesigned the site to comply with the fire safety codes without trying to sneak in an unpaid leasehold expansion.
Our law firm helps landlords monetize (read: sell) their cell tower or cell site lease. It’s a very specialized area of land-use and technology law. There are times such deals make sense, and many more times when they don’t, but you should discuss your situation with a competent lawyer, AND a competent tax CPA.
Many Pitfalls When You Sell your Cell Site Lease!
There are many pitfalls in the standard boilerplate agreements provided by the big guys who buy-out leases. One of my favorite pitfalls is language in the agreement that says that upon termination of the buyout, the landlord has to accept as-is whatever agreements the buy-out firm put in place before the expiration of their contract or easement. Here’s the stinker: Let’s say you sell your cell tower lease for 30 years. During that time the original lease you sold expires, and the buy out enters into a new agreement for 100 years, taking a single payment of, say $1,000,000. In 30 years, you get the lease rights back, but find yourself with a cell site on your property for 70 years with NO INCOME and other bad terms. Yes, this really can happen to you if you’re not careful.
The (Two) Cell Site Lease Sale Documents Count
It’s common for a cell site lease sale to involve two documents: The contract selling the cell site lease to the buy-out firm, and an easement that allows them to enter into new agreements when your current lease expires. There are pitfalls in each, so if you’re not going to have a competent attorney help you, be very careful to think about how you might be stung by some of the more obscure terms in the agreements. Here’s a tip: The more words in a fully-justified paragraph, the more likely bad things are contained therein. It’s a old lawyer’s gambit. Presume that people won’t/can’t read and understand densely worded and long paragraphs. Stick the bad (for the seller) stuff in the middle of those paragraphs.
My law firm professionals and I have negotiated hundreds of leases, lease modifications, agreements, ordinances, etc. over the years. We repeated hear the wireless carriers talk about the ‘rights’ they must have.
Nope. That’s not how it works for the savvy landlord.
We advise clients (and just about anyone else who will listen) that the wireless carrier is negotiating for privileges, not rights.
The very valuable privilege to have a lease extend for 25 or more years;
The very valuable privilege to deny the landlord virtually any means to get out of the lease;
The very valuable privilege for the carrier to get out of the lease on 30 to 60 days’ notice;
The very valuable privilege to take hundreds or thousands of square feet of land for sucker rents of as little as 10¢ per square foot;
The very valuable privilege to suspend rent for some casualty, even when the casualty is the due to the carrier;
The very valuable privilege to impose great duties on the landlord compared with those imposed on themselves; and
Many other valuable privileges that solely benefit the wireless carrier, most commonly to the detriment of the landlord.
You get the idea…the boilerplate deals offered by carriers are hardly equal or fair to landlords. That’s a great reason to use an attorney who knows where the obvious (and the hidden) landmines are to be found in the documents, but I digress.
With the privileges the carrier seeks come payments to the landlord. The greater the bundle of privileges, the greater the payment to the landlord for granting those privileges.
Only when the lease is executed do the privileges convert to rights. Not one second sooner!
Landlords negotiating with the carrier’s agent (and all the better if the landlord has competent legal counsel helping…ahem…) should carefully listen for the words and phrases ‘rights’ or ‘we need’ or ‘we must have’ when uttered by the negotiator for the carrier. Every time that those words and phrases rear their ugly heads…and that will happy often…remind the rep that they are negotiating for privileges, which only convert to rights when the deal is done, fully valued, and the paperwork is fully executed.
The skill and mindset of the landlord’s negotiator for a cell site lease most often makes a huge difference in the result and value produced for the landlord.
I’m simply amazed by many of the tactics used by wireless carrier agents (and therefore condoned by the carrier masters).
Most recently, carrier agents for several big wireless carriers have starting telling potential cell site landlords that if those potential landlords retain the services of outside counsel to help negotiate the lease, there will be financial consequences. Sometimes the threat is the loss of a paltry signing bonus. Sometimes its reduction in the proposed monthly rent.
What strikes me about such threats is how two-faced they are. I know of exactly zero—zilch—nada— wireless firms that enter into lease without having their own attorneys review the documents first.
I tell clients that hear these threats that they should be even more cautious about entering into leases. The stock leases promoted by wireless carriers are, not surprisingly, aimed at grabbing as much as they can from the landlord while paying as little as possible for those grabs. Given that the leases usually run from 20 to 30 years* a landlord making a mistake or missing some well-hidden key point at the lease inception will haunt the landlord for decades.
Duck away from the sucker punch: If the carrier’s agent makes a veiled or direct threat in response to your decision to retain outside counsel, trust your gut. Someone who doesn’t want you to use an attorney has a very good reason for that, and it’s not because they want to do you a favor.
*One wireless tower firm now claims that their standard lease is 100 years in duration. My response: If that’s that case, we’re going to put even greater limits on what they can do at the property. Their response: Either silence or sucking sounds.
John Pestle and I will once again present an updated version of our very popular lease buy-out lecture, “Selling Your Cell Tower Lease.” This time we’ll present on April 9th, 2014 at 1:00 p.m. EDT/10:00 a.m. PDT. Lorman Education Services hosts many of the lectures John and I present, and they do an outstanding job at it.
Here’s the updated lecture description:
Property owners with a cell tower or cell antennas on their property routinely receive six-figure offers to buy the cell tower lease and future leasing rights. While very attractive, those offers-typically structured as perpetual easements-pose unusual legal, financial, and technical risks that the property owner and its regular attorney typically are not familiar with. This live webinar will guide property owners and their attorneys as they evaluate and respond to such offers. It includes covering what drives the offers, typical prices, how to evaluate financial terms to determine whether selling makes sense (and when it doesn’t). Those who attend will be better able to evaluate purchase offers, identify and modify the very one-sided documents offered by purchasers, and address some of the risks involved in a sale. Risks include making sure the property owner is not hindered in developing or using its property, ensuring that future sums promised by the purchaser in fact are paid and the contract honored (and the sale terminated if they are not), insurance and bankruptcy protections, as well as questions as to the financial solvency of the buyer. These risks increase as the easement term increases (typically from 50 years to perpetual) given that the property owner continues to own the underlying property. Government agencies face all of the preceding issues, plus special and fundamental questions of municipal authority, compliance with municipal finance/procurement statutes, prohibitions on waste, and risks of accidentally triggering property reverters.
– You will be able to know when a sale does and does not make sense for you.
– You will be able to discuss revising documents to protect property owner and address the preceding issues.
– You will be able to recognize sales terms preventing the property owner’s future use or development of its property.
– You will be able to define the major legal risks involved in selling cell tower leases and easements.
A “casualty” clause in a lease is commonly included to provide a way of altering the terms of a lease or outright terminating a lease before its natural expiration if something bad happen.
Something like a fire.
Take a look below at the standard template language found in a very well-known carrier’s boilerplate agreement. After that, I’ll tear it apart for you, as a potential cell site landlord, to better understand what’s going on, and how it might come back to bite you.
CASUALTY. Landlord will provide notice to Tenant of any casualty or other harm affecting the Property within forty-eight (48) hours of the casualty or other harm. If any part of the Communication Facility or Property is damaged by casualty or other harm as to render the Premises unsuitable, in Tenant’s sole determination, then Tenant may terminate this Agreement by providing written notice to Landlord, which termination will be effective as of the date of such casualty or other harm. Upon such termination, Tenant will be entitled to collect all insurance proceeds payable to Tenant on account thereof and to be reimbursed for any prepaid Rent on a prorata basis. Landlord agrees to permit Tenant to place temporary transmission and reception facilities on the Property, but only until such time as Tenant is able to activate a replacement transmission facility at another location; notwithstanding the termination of this Agreement, such temporary facilities will be governed by all of the terms and conditions of this Agreement, including Rent. If Landlord or Tenant undertakes to rebuild or restore the Premises and/or the Communication Facility, as applicable, Landlord agrees to permit Tenant to place temporary transmission and reception facilities on the Property at no additional Rent until the reconstruction of the Premises and/or the Communication Facility is completed. If Landlord determines not to rebuild or restore the Premises, Landlord will notify Tenant of such determination within thirty (30) days after the casualty or other harm. If Landlord does not so notify Tenant, then Landlord will promptly rebuild or restore the Premises to substantially the same condition as existed before the casualty other harm. Landlord agrees that the Rent shall be abated until the Premises are rebuilt or restored, unless Tenant places temporary transmission and reception facilities on the Property.
Okay, now let’s rip this bad-boy paragraph apart and see what’s under the hood…
“Landlord will provide notice to Tenant of any casualty or other harm affecting the Property…” This sentence places an affirmative duty (a burden) on the landlord to notify the wireless carrier of “any casualty or other harm” affecting the property. So what qualifies as a casualty or other harm affecting the Property? Well, it might be a fire burning down the building, or earthquake, or airplane crashing onto the property, but those are all obvious. What about a toxic gas cloud from a tanker spill 3 miles away wafting over the Property? Yup. How about a small fire in a
“…within forty-eight (48) hours of the casualty or other harm.” Well, that’s 48 hours after ‘it’ happens, whatever ‘it’ is. If you are a landlord who does not live at the property, you might now become aware of the ‘it’ that happens on a Friday night at 7:30 p.m. until you come in on Monday morning. By this time you’ll be in breach of your duty to notify the tenant within 48 hours!
“If any part of the Communication Facility or Property is damaged by casualty or other harm as to render the Premises unsuitable, in Tenant’s sole determination, then Tenant may terminate this Agreement by providing written notice to Landlord, which termination will be effective as of the date of such casualty or other harm.”Okay, let’s break this into even smaller chunks:
“If any part of the Communication Facility…”which would mean the cell site, or any element of it…
“…or Property…”which is your property, upon which the cell site resides…
“…is damaged by casualty or other harm…” which, as we’ve seen above, is anything bad…
“…as to render the Premises unsuitable,…” Unsuitable? Perhaps they just don’t like the Premises anymore. ..
“…in Tenant’s sole determination…” which means that only the tenant gets to decide, and missing the magic word “reasonable.”
“…then Tenant may terminate this Agreement by providing written notice to Landlord,”… Okay, we’re outta here because we sent you a letter…
“…which termination will be effective as of the date of such casualty or other harm.”This allows your tenant to backdate the termination date to the date of the oops.
“Upon such termination, Tenant will be entitled to collect all insurance proceeds payable to Tenant on account thereof…” If your tenant is named as an additional insured on your fire policy, get who gets to collect.
“…and to be reimbursed for any prepaid Rent on a prorata basis.”So, you the tenant just paid you the day before the oops for the entire month, you get to refund all but one day’s rent back to your tenant.
“Landlord agrees to permit Tenant to place temporary transmission and reception facilities on the Property, but only until such time as Tenant is able to activate a replacement transmission facility at another location;…” Hold on, the cell site burned down and they terminated the lease, but they still get to bring a temporary cell site on your property? Yup. You got it. For how long? Good question! Since the lease is terminated, they get to stay for as long as they want, somewhere on your property.
“…notwithstanding the termination of this Agreement,…“ Read it this way: ‘even though the Lease is now terminated…’
“…such temporary facilities will be governed by all of the terms and conditions of this Agreement, including Rent.”…it’s as if you are on a day-to-day agreement, which you cannot terminate, under the terms and conditions of the old lease.
“If Landlord or Tenant undertakes to rebuild or restore the Premises and/or the Communication Facility, as applicable, Landlord agrees to permit Tenant to place temporary transmission and reception facilities on the Property at no additional Rent until the reconstruction of the Premises and/or the Communication Facility is completed.”But if YOU or the tenant decides to rebuild or fix the cell site and your tenant does NOT terminate the lease, you agree to allow the tenant to bring a temporary cell site on your property…for no additional rent…while the fixing is taking place.
“If Landlord determines not to rebuild or restore the Premises, Landlord will notify Tenant of such determination within thirty (30) days after the casualty or other harm.”if you do not intend to fix their cell site, you have to tell them that within 30 days after the oops occurs. Do you think you’re going to have your insurance settlement nailed down in 30 days? Nope, me neither.
“If Landlord does not so notify Tenant, then Landlord will promptly rebuild or restore the Premises to substantially the same condition as existed before the casualty other harm.”Let’s just say that if you forget to notify the tenant within the 30 day window? Get who gets locked-in to fixing the damage? By the way, get who’s going to get stuck with the bill? Yeah, that’s right.
“Landlord agrees that the Rent shall be abated until the Premises are rebuilt or restored, unless Tenant places temporary transmission and reception facilities on the Property.” So if they don’t terminate, and they don’t bring a temporary cell site on the property, you get no rent while their smoldering remains litter your property.
So here’s the kicker: Think about the photograph just above of the burning cell tower. That fire was caused by a welder working on the tower at the direction of the tenant or subtenant. Under the language of the casualty clause you’ve just read, even if a fire (or other casualty) is caused by a tenant’s activities at a cell site…welding, for example…the tenant can still take advantage of all of the benefits of the casualty clause.
Now that you see how the standard cell lease casualty clause does nothing to protect the landlord, and everything to benefit the tenant (and only the tenant), you understand need to revise the casualty clause to limit it to apply to casualties not caused by or attributable to your tenant, and to strike portions of it altogether.
Like I said, don’t be a casualty of a wireless lease casualty clause. We can help you avoid this predicament.
(Updated: July 29, 2013. I’ve had a lot of comments about this post, all positive, so I start highlighting similar one-sided provisions in future posts.)
I’ve seen wireless carriers attempt land grabs before through a cell tower lease, but a current incarnation is particular amusing.
Framed as an “Emergency 911 Service” provision (hey, that sounds like something really important, right?), the carrier’s attorney has authored the lease provision below to allow the carrier to take as much additional land as the carrier needs without benefit of paying rent.
First, I’ll ask you to read the language below, exactly as stated by the wireless carrier, then I’ll parse it for you.
Emergency 911 Service. In the future, without the payment of additional rent and at a location mutually acceptable to Lessor and Lessee, Lessor agrees that Lessee may add, modify and/or replace equipment in order to be in compliance with any current or future federal, state or local mandated application, including but not limited to emergency 911 communication services.
Okay, piece by piece, let’s deconstruct this this one little sentence with its 58 words:
1. “In the future…” starts about 1 trillionth of a second from right now. Maybe even sooner. Okay, you’re in the future. Oh, by the way, the future never ends. This clause is good for the remaining term of of the lease to its final extension.
2. “…without the payment of additional rent…” Do I really need to tell you that this means no more moola for more land?
3. “…and at a location mutually agreeable to Lessor and Lessee…” Now wait just a minute. You’re thinking that you can just say there is NO mutually agreeable location, right? Nope. Most states impute a good faith term to contracts (including leases which are contracts for the occupancy of land for a term). This means that you can not mentally cross your fingers when you agree to this provision. Most likely a judge will ‘help you’ understand your duty to negotiate in good faith. Judges can be so very helpful. So how much space is available at the location? As much as the wireless carrier wants to meet the rest of the provisions
4. “…Lessor agrees that Lessee may…” You, the Lessor, agree that your tenant at the time can do anything described immediately after, so lets look at each thing in turn.
5.”…add…” start with what’s at the site and put more stuff within the existing leased area, or in the new area that they just got for free.
6. “…modify…” is to take something there and change it, mostly likely to make it bigger or better for the carrier.
7. “…and/or replace…” so maybe the site/stuff in it is added to, modified, AND replaced all in one shot…any individual element, or any in combination will do.
8. “…equipment…” which is NOT usually a defined term in the lease, and since this word is in lower case, it can mean anything from the tower, to the antennas, the radio cabinets, the cables, to the utilities and beyond. In other words, the carrier is likely to say that everything is equipment, and you bear the burden to disprove it. Yeah, good luck on that one.
9. “…in order to be in compliance with…” generally to meet the requirements, but not necessary the minimum requirements of something. What something? Keep reading.
10. “…any current or future…” now or in the future.
11. “…federal…” is the federal government, including Congress and all of the known and unknown federal agencies, as well potentially any of the federal military units (Army, Air Force, etc.).
12. “…state…” that big outlined place on the U.S. map where you and several million of your friends live.
13. “…or local…” that smaller outlined place within the bigger outlined place on the U.S. map where you and several hundred thousand of your closest friends live.
14. “…mandated application…” Wow! A mandated application. Doesn’t sound like it even rises to the level of a law or regulation. It’s more like something you might download from the Apple iTunes store or Google Play. Okay, we know that something is mandated, which suggests that its required. But the failure to do something required may not be actionable, or actionable at a particular time. Obviously this term is subject to broad interpretation, and guess who’ll do the interpreting!?
15. “…including but not limited to…” so whatever is mandated is an include item, but not the only item.
16. “ …emergency 911 communication services.” So now we really discover that the bolded title of the section, “Emergency 911 Service” is just a ‘red herring’ element of a much larger scheme to separate a landlord from the use and value of his or her property. Yup, emergency 911 communication service sounds really important, but as you can see, it has very little to do with the core of this lease term.
There you have it. Just one little 58 word sentence, which breaks out to 16 elements, all of which are designed to be a free land grab by the tenant.
Do I fault the wireless companies for trying to pull this little shenanigan?
Of course not.
As wireless companies know, and as you should as well, their true duty is to maximize profits for the shareholders. Their duty to the Landlord is as little as possible, and attempts to reduce that duty by leases and lease amendments are all part of The American Way.
Now you know that the answer to the question in the title of this post depends on whether YOU make it worthless by agreeing to this sucker punch provision.
If you are asked to agree to provisions that you don’t understand, or you don’t think you understand, or even the ones you think you understand but really don’t, you might want talk with an experienced wireless attorney and law firm working for landlords.