Cell tower lease agreements often include an escalator clause as a way to ensure your contract keeps pace with inflation. Understanding the benefits of an escalator clause can help you avoid lost income over the years a cell tower is in place.
How does your lease agreement work?
The initial use of an escalator in a contract was based on the needs of trade union members who wanted to safeguard an annual raise in their wages, according to the Free Dictionary. The escalator clause was first created as a way of protecting both the workers and employers as they moved through the life of a contract. Employers agreed to a certain level of income increase after a specific period of time and workers agreed to these wage conditions.
It is standard practice for any cell tower lease agreement to include an escalator guaranteeing a landowner a specific payment each month. The basic idea behind these clauses is for them to keep pace with the cost of living and avoid the need to return to the negotiating table after a short space of time.
The length of a cell tower lease
There is no guaranteed length of a contract when you are looking to secure a cell tower lease agreement. However, most cell tower manufacturers will work with a landowner to agree to a lease lasting in multiples of five years. The basic idea behind the use of multiples of five is the common practice of companies including an escalator agreement providing a rise in income every five years.
How much rental income can I expect from a cell tower rental agreement?
The answer lies not in looking at the value of having a cell tower on your property but the value and potential value of the use of your property to the company that wants to lease it for decades into the future. A cell tower lease differs from other agreements that you may be familiar with due to its long-term nature and that it cannot be renegotiated when you believe the value of the use of your property has increased.
With these long-term implication in mind, property owners should view the lease negotiation not as a sprint but a marathon. You need a short- and long-term strategy to truly optimize this contract.
The most important thing to keep in mind is that the value of your lease agreement is not dependent on the value of other agreements around you and you should not rely on “market rents” to determine your rent rate.
Vertical Consultants can assist you in reviewing what the value of your cell tower lease may be not only today but decades into the future. If you’d like to learn more about what the real value of your cell tower lease is, contact us today for a free lease review.