[EDITOR’s NOTE — A few weeks ago we ran a piece about the potential benefits of leasing land for cell tower use. The popularity of that article took us quite by surprise, so much so that we thought a follow-up was in order. Here, guest author Hugh Odom, president of cell tower specialists Vertical Consultants and a former AT&T attorney, drills a good bit deeper into how a cell tower on your land can work for you.]
Thanks to the rollout of 5G networks and increased demand to expand cell service to more rural areas, there is a lot of talk around cell towers and cell tower leases. Tower leasing activity increased last year and the projected rates for the year ahead indicate even more growth in coming years.
Every day, landowners are contacted about adding cell towers to their land and existing leases are being extended.
At first glance, the lease offers sound great. The tower company will tell you it’s a win-win — and it certainly can be. But before you sign the dotted line, it’s important to understand what you’re giving up & what you’re going to gain.
One of the most important factors to consider is the length of the contract & who is legally obligated by it. My dad used to tell me that certain situations were like a “ham and egg breakfast”. The chicken is participating and the pig is committed.
Most cell tower leases are the same as a “ham and egg breakfast”: the cell tower company can terminate the cell tower lease whenever they want, but the property owner is committed for 20, 30 or more years.
Before you sit down to the breakfast table with a cell tower company, know exactly what is on the menu.
What You Gain
What you gain by allowing a cell tower on your property is simple: money. You will either collect rent or get a lump sum payment for the right to use your property.
Cell tower site values are not determined in the same manner as real estate value, and this is something Landowners need to understand. Each tower site will have its own unique value. Unlike real estate, there isn’t going to be a market rate comparison. That means asking your neighbor about their cell tower lease won’t work. It also means that even if your neighbor accepts a low offer, you don’t have to.
Additionally, the rent rate for today is only the short term picture – what might the rent rate be like in 5 or even 10 years? Cell tower lease agreements are structured for long periods of time, up to 90 years. The costs are significant. Installing the tower, adding additional equipment that’s needed, and updating any necessary improvements at the site itself can cost hundreds of thousands of dollars.he length of time for a lease is multi-year because the cell tower company needs to occupy and use the site long enough to be able to recoup some of their invested money.
Due to the time and money involved, telecommunication companies generally never grant a broad right to terminate at the end of a lease term or renewal. At least not for the property owner, though they may include an early termination clause for themselves. This allows the cell tower company to terminate the lease should the tower location become unusable because of technology problems, or if it loses its license or permit to operate, or, more importantly, if it finds the tower site unsuitable due to changes in economic conditions.
What You Give Up
There are multiple factors to consider when negotiating a cell tower lease, whether the lease is new or existing. The most important thing to keep in mind is that the property owner’s bargaining power is directly related to the available options a cell company has, as well as the overall value of the cell tower location (or potential location).
For example, are there other buildings or properties in the area with a similar layout and zoning classifications that cell tower company might consider? Does the property allow enough space for not only construction of a tower, but possible expansion in the future? A cell tower company will typically need anywhere from 500-5,000 square feet of ground area on a tower installation.
Other considerations include long term implications and possible liability exposure. Things to consider are:what happens if a property owner wants to sell the land but may not terminate the contract? What if improvements to the property are desired, but the property owner is restricted by the location of the tower or other supporting equipment? Will the property’s value decrease because of the cell tower? If the tower is damaged, who is responsible for the cost of lost service to customers?
Property owners need to structure flexibility and protection for their land and rights, because no one can know what the future will bring. Without proper consultation, contracts are written with terms meant to protect the company, not the property owner. Certainly, cell towers can be an economic boost for landowners, but the options should be carefully weighed before any paperwork is signed.
Hugh Odom is the President & Founder of Vertical Consultants, a cell tower lease-consulting firm. Before founding Vertical Consultants, Odom worked for 10 years as an attorney for AT&T, negotiating cell tower lease agreements. He now brings his experience and expertise to help landowners and property managers secure the best deal possible for their properties. Learn more at https://www.celltowerleaseexperts.com/