Understanding Cell Tower Leases

Telecommunications companies are increasingly reaching out to property owners to discuss cell towers lease agreements -- whether it’s negotiating new ones or renegotiating existing contracts. After all, much of today’s lifestyle is built around cell phone use. The expanding reach of cell phones is also what increases the need for proper coverage. One could make the argument that these cell towers have become the very backbone of modern life. Yet, many people who are contacted don’t understand the full value of a cell tower on their property.

It is in the cell company’s best interest for property owners to think they are in a win-win situation. Property owners are constantly told the story that they are getting easy money, which comes in through rent paid by the cell company. This may be true, but there are several factors property owners should know before signing any paperwork for a cell tower agreement. Here are three things to consider:

Know your real rent value.

Communication companies will often make an initial offer that includes misleading, high-pressure tactics and language. For example, property owners may be told that engaging in negotiations will cost them the potential cell-site lease opportunity. This is often false. Property owners need to understand that they are the ones bringing real value in the negotiation. The tower company needs their land.

Remember: Each tower site has its own unique value, which is increased when other possible sites aren’t available. There is no available market value for comparison in these cases, so asking neighbors with existing contracts is not an accurate comparison.

Additionally, consider what is the optimal rate today, in 5 years, or 10? Since cell tower companies are looking to protect their own interests, the initial offer will be substantially lower than the real rent value over the life of the contract.

Consider long-term implications.

Cell tower lease agreements may be structured for up to 90 years. No one can predict the future, which is why property owners need to structure flexibility and protection for their land and rights. Otherwise, they will be at the mercy of the cell tower company’s terms -- terms which are meant to protect the company, not the property owner.

For example, what happens if a property owner wants to sell the land and cannot terminate the lease agreement? What if a property owner wants to make changes or improvements to the property but is restricted by the location of the tower, the cables, or other supporting equipment?

Watch out for possible exposure.

Property owners need not only to consider what they are gaining with a cell tower agreement, but also what they may be giving up -- as well as the financial liability they may incur.

Will the property value decrease with a cell tower site? If the tower is damaged accidentally by the property owner who is responsible for the cost of lost service to the cell tower’s consumers?

Bottom Line

Cell tower lease agreements can provide wonderful passive income opportunities for property owners, but all options must be carefully weighed. Though an initial offer may have appeal for the short-term, the long-term consequences will be significant. As with any contract or long-term agreement, property owners considering cell site lease agreements should seek counsel from a professional before making any final decisions.

About the Author

Hugh Odom is the President & Founder of Vertical Consultants, a cell tower lease-consulting firm. Before founding Vertical Consultants, Mr. 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/