The Experts Break Down An Example Of A Cell Tower Lease Agreement
We are contacted every day by people across the United States who have been approached by someone looking to lease their property for the purposes of building a cell tower on it. This process has been taking place since the inception of the wireless industry almost 40 years ago.
The interesting thing is that as much as the wireless world has changed from “brick phones” to “flip phones” to “smart” ones, the method by which wireless carriers, like AT&T, Verizon, T-Mobile and Sprint, and cell tower companies, like Crown Castle and American Tower, have acquired land to build cell sites has not changed that much. The simple reason why is because the method not only works, but also makes them a lot of money today and well into the future.
New Lease Offer – Property Owners Beware
The following is a quick anatomy of the process that these companies follow to convince you to sign an agreement that is very good for them, but not so great for you:
1. First Contact
Most property owners are initially contacted by phone or, more likely, by a letter, not by the tower company directly, but by a third-party company working on that company’s behalf. The letter basically states the following:
“Your property has been identified as being a suitable candidate for a proposed cell tower site. The project would entail the leasing of a small portion of your property from you for the placement of cell tower and associated equipment within a small fenced compound surrounding the cell tower. You will be paid monthly rent in the amount of $_____.”
The letter seems quite straight forward, but, like a good magic trick, there is more than there appears.
The company contacting you has peaked your interest by offering something for what seems to be a small price in return.
Notice how they emphasis that you are “a candidate”. This is to let you know they are interested, but that you are not the only option. Psychologically, this gets you to respond in a quick manner, and, at the same time, plants a seed of leverage that we will discuss below.
Next, they focus on the use of your land in how they will only need a small portion. Again, this a deliberate action in that it not only allows for them to defuse your concerns about how this might impact your overall property, but it also makes the overall terms seem better as you are going to receive money for giving up little in return.
The real story is that a property owner is not only being asked to lease a portion of their property, but also to place certain restrictions on your entire property.
Lastly, they have thrown out the bait – rent – for you, and they hope you will chase it all the way to signing an agreement that is best for them and not for you. The bait is simple, it is the perception of getting something for nothing or, in this case, very little in exchange.
Remember the old saying: “Beware of strangers bearing gifts.”??
2. The Offer and Term Sheet
If you have already taken the next step and contacted the tower company or their representative, that company will most likely try to get you to agree to basic lease terms via a term sheet. Use caution – while a company may state that these terms are non-binding and that they just need your signature to move forward, down the road, if you need to modify terms based upon new information you did not have at the onset, they will emphasize that you signed a “term sheet”.
The term sheet will set forth some basic items like the following:
- The name of the Tenant
- The name of the Landlord
- The property address
- The size of the area to be leased
- What the property will be used for
- The amount of rent that will be paid
- The grant of option terms
- The term or length of the cell tower lease
Again, all of the above seems pretty standard, but, as stated above, sometimes the seemingly obvious is not what it appears to be.
The cell tower company is trying to get you focus on what they want you to know and not what you need to know.
Think about it, you are being asked to determine the amount of space you are going to allow them to use, the amount of time it can be used and the amount of rent you will be receiving (arguably three of the most important elements of the lease) but you have not seen the entire lease agreement with all the rights you are giving the cell tower company or the obligations you are taking on as the landlord. In addition, most likely you have not been provided a detailed description of all the areas that the cell tower company will use.
Remember, throughout the cell tower lease process, the company that has contacted you on behalf of the cell tower company works for them and not you. No matter how helpful or nice they seem to be, they do not work for you.
3. The Negotiation
Cell tower companies and the firms that work on their behalf are extensively trained to get property owners to go down a path that, at the end of day, benefits them far more than it will ever benefit the property owner who is being asked to lease their land.
A cell tower company will use several methods to get to an optimal result for them. The two most common methods are simple and have been around for a very long time.
The first is “temptation”. As discussed above, a cell tower company is trying to get you to focus on what you are being offered and not what you are being asked to give up in return, or, more importantly, what you are offering the cell tower company by allowing them to use your land.
They will emphasize that you are only being asked to give up the use of an area on your property that you would otherwise not be using or almost never be able to generate revenue from. Due to this, you should take any amount of rent they offer you and agree to whatever other terms they are requesting. They are offering you what the other property owners have agreed to in the past. They will say the terms are standard in the wireless industry.
All the above means is that they are asking you to follow the line of people who have previously signed bad cell tower agreements. Not only did the landowners get less than what the real value their property was worth, but they also agreed to terms that could have a negative impact on them and on their property for decades into the future.
The only real standard in the cell tower industry that you understand is cell tower companies have and continue to get cell tower leases that provide them far greater value than they pay in return to the property owner that provides the critical component in the cell tower equation – that being the location of the cell tower.
The next method of getting you to sign an agreement that the cell tower company wants you to sign is the “perception of leverage”.
As the initial letter that you received may have stated you are “a candidate”, that word is not used accidently. A cell tower company wants you not only to be tempted but also feel uneasy that if you do not agree to the terms that they want you to agree to that they have other options. If you don’t agree to their terms, they will go down the street and get someone else to.
While we are not saying that a tower company may not have other alternatives, they are spending the time trying to lease your land because the other options they may have are not as good. However, they know they only need the perception of this to get you do what they want.
Lastly, no matter whether you are tempted by the money or afraid you will lose out on an opportunity that someone else will snatch up, always remember that no matter how much research you may have done or even how much you may know about real estate, the cell tower companies negotiate cell tower agreements every day. Their greatest strength is not just being able to take things away from you without you realizing it, but, more impressively, being able to give you things that are really not what they appear to be.
Before You Sign A Contract
Do not miss out on your opportunity to get a fair deal. Once you sign an agreement with the cell tower company, you may be stuck with their terms for decades. Contact us for a free consultation and review.