[EDITOR’S NOTE – This month’s column comes from AgSouth Farm Credit Legal Counsel Wes Sutton. We welcome your questions about financial matters, business or personal – just send them here and look for the answers or request a private reply.]
With recent efforts to expand cellular network coverage in rural areas, there may be opportunities for farmers and landowners to make additional income by leasing a portion of their property for a cell tower. Negotiations are typically initiated by site acquisition or leasing specialists, whose job it is to find suitable locations to build out the network of one or more wireless carriers. While these lease arrangements can be mutually beneficial, there are several items you should consider.
Tower owners typically seek out the best location for maximum coverage. A landlord should consider the placement of the tower and what that location might do the rest of the property or the aesthetics – such as whether or not you will see if from your house. Also keep in mind that the tower owner will also need an easement to access the tower location and to run utilities, along with some easement for a “fall zone.” All of this should be addressed with a survey showing exactly where the tower will be located, where the equipment will be installed, and location of the access or right of way.
Next to location, the most important question to answer is how much rent will be paid? For the most part, the tower companies have an established amount they are willing to pay, but this may vary based on location and the number of alternative properties that are available. Typically, these multi-year leases will have some additional step-up in the rental amounts based on inflation or some pre-negotiated year-over-year increase.
Great Additional Income, Limited Interruption
Given the amount of investment in site work and construction costs, the tower company or carrier will generally want a multi-year lease with the right to renew for one or more subsequent terms. The lease will typically set out that no rent is due until commencement of construction of the tower. Keep this in mind as you may negotiate and enter into a lease that won’t actually pay you for many months.
Specific provisions should also outline the ability of either party to terminate the lease, including any events of default and rights to cure the same. Look for language that addresses the obligations of the tower company or carrier to remove the tower and equipment and promptly restore the property upon termination or expiration of the lease.
Finally, if the property is collateral for a loan, your lender will need to be involved in the lease approval. This usually involves the lender accepting a subordination and non-disturbance agreement which ensures that even if the loan defaults and the property is foreclosed upon, the terms of the lease will still be honored. In some instances, such as if the tower negatively impacts the value of the collateral, the lender may require an assignment of the rental proceeds be applied to the debt.
Overall, a properly negotiated cell tower lease can provide good additional income to a rural landowner for many years to come with minimal disruption of their land.