Negotiating Cell Tower Leases

Important Factors When Negotiating

Several factors must be considered when negotiating with a tower company about a cell site, including:

1. the characteristics of your property or building, such as how tall is your building relative to the adjacent buildings in your immediate area, or does your land contain topography attributes that distinguish it from others in the area;
2. what options does a cell tower company have as it pertains to other buildings or properties in the area with a similar layout and zoning classifications; and
3. does your property provide sufficient space for a cell tower company to not only construct a tower, but to allow for possible expansion in the future.

So, with all that being said, ultimately, a landowner’s bargaining power and leverage at the negotiating table is going to be directly related to the options that a cell phone carrier or tower company has, as well as the overall value of your potential tower location. This is where we can truly make an impact for you, as we can assist by determining the true value of your property as it relates to a cell phone tower lease.

If you move forward with cell tower lease negotiations, the following areas are of primary concern:

Rent – Rent offered for a cell tower will be based upon numerous and varying dynamics. The most important factors are: a) space requirements of a cell phone carrier or tower company to install its equipment and b) the overall utility and functionality of the cell tower location to that cell phone carrier or tower. The amount of space (either ground or rooftop) will be dependent upon the type of equipment to be located on a property. The cell tower company will not only be looking for enough space to install its equipment, but enough space to accommodate potential subtenants/co-locators. This will typically mean that a cell tower company will need anywhere from 500-5,000 square feet of ground area on a tower installation, and can need as little as 100 square feet on a rooftop installation. However, contrary to other commercial leases a property owner may be familiar with, the amount of space needed is not the most crucial component in the value of a site to a cell phone carrier or tower company, and, as a result, rent is not directly tied into the amount of space required. We take pride in being able to assist you in determining the answer to this crucial piece of the cell tower site puzzle.

Co-Location Fees and Sublease– Cell phone carriers build cell towers for functionality, while a cell tower company builds cell towers for the revenue potential only. Just think of a cell tower as a strip mall in the sky. As a result, a landowner should share in this revenues shouldn’t they? In addition to the monthly base cell tower lease rents, a landowner should also be aware of the potential to garner certain additional rent from revenue sharing with the tenant. It is advantageous for a property owner to accurately determine what options a cell phone carrier or tower company may have, and, more importantly, what value the site will ultimately garner for the tenant in the form of revenue during the term of the lease. Vertical Consultants has decades of experience in the industry that allows us to accurately determine what options a cell phone carrier or tower company may have, and what utility the site will ultimately garner for the tenant. This knowledge will assist a property owner in obtaining the favorable terms in any lease negotiation, including, but not being limited to, its ability to request revenue sharing from a tenant.

Cell Tower Lease Term and Commencement– A landowner is usually asked to make a long term commitment when it comes to leasing a portion of its property to a cell phone carrier or tower company. The typical cell tower lease has an initial term of five (5) years, with between three (3) to five (5) successive options for renewal terms, at the sole option of the tenant. The reasoning behind the long term nature of the cell tower lease is due to the costs involved in not only installing the tower and other equipment installed at that location, but in the necessary improvements at the site itself. This can cost hundreds of thousands of dollars. Therefore, a cell tower carrier or tower company must occupy and use the cell tower site long enough to be able to recover a reasonable amount of their invested money. Because of the time and money involved, a cell phone carrier or tower company will never grant the property owner a broad right to terminate at the end of a lease term or renewal, or to otherwise bar the carrier’s or tower company’s right to renew. While this does, in some ways, limit the property owner in its control of the cell tower location, as it relates to the term of the lease, this can prove to be a positive for the property owner as well. For the most part, due to the tenant’s investment in the site, it will serve as some form of security in the long term source of revenue that will be received by the property owner. We can work on the property owner’s behalf to structure a cell tower or rooftop lease that allows the property owner not only the most flexibility when it comes to the term of a lease, but also making sure the property owner receives “true value” for the tenant’s occupancy and use of the tower site during such term.

Lease Termination– Well, as mentioned above, a cell tower company or cell phone carrier is making a large investment in a property and needs a long term commitment, so why does that same company insist on having a right to terminate a lease on short notice? A property owner will commonly notice that a cell phone carrier or tower company will seek an early termination clause in a cell tower lease, with as little as thirty (30) days prior written notice. The reason for this early termination clause is that the carrier must be able to terminate if a cell tower location becomes 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. We can work on a property owner’s behalf to eliminate some of these reasons altogether, or, at least, increasing the notice period for termination under these circumstances. Moreover, we have been successful in the past in negotiating lease terms in which the cell phone carrier/tower company will agree to some form of termination fee in exchange for the right to terminate the cell tower lease before it reaches expiration.

We work on your behalf to get you the most and give up the least during negotiations. We advocate for terms that establish rights that are beneficial to you, while limiting the obligations your may have under the agreement. Remember, any property owner’s first step is to establish “True Value” of the potential cell site, and go from there.

Unlike other companies, Vertical Consultants does not just provide you advice and then leave it up to you to do the heavy lifting. If you are only looking for negotiating tips, here are a few from Harvard Business Review. We work on your behalf from start to finish, and our initial review of your cell tower lease is FREE — yes, you read that right, FREE of charge.

In addition, unlike those other companies, if you decide to work with us, we only benefit if you benefit. We welcome the chance to work with you to maximize the return on your lease, while protecting the interest on your property.