A Company Has a Towering Offer: Under What Conditions Should You Say Yes?
With the number of U.S. smart phone users estimated to climb to 271 million by 2022, telecom providers are rushing to add capacity, and tower companies are working hard to accommodate the telecom providers’ need for infrastructure. Tower companies are dangling large sums of money in front of property owners whose locations can hold such infrastructure, thereby enabling telecom providers to relieve network congestion and strengthen coverage.
Tower companies are always looking for new and creative locations to place communication equipment. (i.e. Who would have guessed that telecom providers would one day place small cell antennas on downtown streetlights?) For various reasons, they often prefer to pay up-front, lump sum payments for perpetual property rights instead of monthly rents. These payments often exceed $300,000, and every so often reach as much as $1 million.
Before entering binding agreements for these kinds of arrangements, tower companies generally send a letter of intent to the property owner, memorializing the parties’ payment terms and the general scope of their agreement. Once the parties agree on the business terms and sign the letter of intent, the tower company will send over its standard form of easement documentation while it begins its site-specific diligence efforts.
At that time, property owners have the opportunity to propose edits that control the parties’ relationship going forward. Depending upon the circumstances, tower companies accept certain changes and push back on others.
Here are a few issues property owners should consider addressing when negotiating these kinds of agreements:
- Maintenance and Repairs: The property owner should require the tower company and its licensees to maintain and repair the leased premises and any easement areas. If not, the property owner may bear such a high cost for acts and omissions of the tower company and its licensees that any profit will be wiped out.
- Asset Preservation: When telecommunication equipment will sit atop the roof of a building, for example, the property owner should require the tower company to secure its equipment in a manner which minimizes the number of punctures in the rooftop membrane. For example, only the beams and platforms which sit on the rooftop should be fastened to the rooftop. All related equipment should be fastened to those beams and/or platforms. This practice will reduce the risk of leaks, and it will help preserve any applicable rooftop warranty at the building.
- Safety: When telecommunication equipment is located on a farm or ranch, for example, property owners should require that the tower and related equipment be fenced off so animals do not accidentally harm themselves. If a guy wire tower is placed on one of these sites, the guy anchors also should be fenced off for similar reasons.
- Access: Tower companies generally spend more than $150,000 to construct a tower, not including their costs for diligence and governmental approvals. Because towers are expensive, it is imperative that their investments function smoothly. For this reason and others, tower companies generally require unfettered access and utility service to their sites. While it is not unreasonable for a tower company to require access on a 24/7 basis if the site is located on a large tract of open property, those in charge of condominiums and commercial buildings may find it important to impose rules regulating the hours during which tower personnel may be onsite, and what notice or identification requirements may be necessary for such entry. The goal of any such regulation should be geared toward the safety, well-being and in the commercial context, productivity, of the property and those who own and/or lease nearby space. Tower companies are mindful and generally receptive to property owners’ concerns, but still frown on access limitations.
- Taxes: When infrastructure and equipment is placed at a site, property assessors sometimes increase the taxable basis of the applicable property. To avoid paying tax bills that absorb such costs, property owners should require the tower company to take steps to create a separate tax parcel for the tower site and pay that bill directly to the tax collector. Until such a new tax parcel is created, the parties’ contract should clearly state that the tower company will pay for any increase in tax liability sustained by the property owner, which is directly attributable to the tower company’s equipment at, and use of, the property.
- Aesthetics: To some people, cell towers tend not to be “pretty” objects. Some property owners and their neighbors object to the placement of towers on their properties because they are viewed as objects that adversely affect the marketability and value of property. Depending upon the circumstances, a property owner may condition a tower company’s use of a site on its ability to blend the tower into its surroundings. For example, tower companies have the ability to construct a stealth tower that may resemble anything from a cactus, to a palm tree, to a flag pole.
- Conflicts: It is important for property owners to understand that tower companies will not agree to terms and conditions that might violate their loan requirements, or that might create unreasonable hardships for telecom providers that use the infrastructure at any given location. A property owner’s insistence upon including terms and provisions that exceed a tower company’s risk tolerance and/or run afoul of its core principles not only jeopardize the deal in hand, but also may strain an existing relationship at that communication site.
Although property owners and tower companies generally are able to agree upon terms that benefit both parties, if during the negotiation process a tower company insists upon including concepts that exceed the property owner’s comfort level, the property owner should attempt to balance the benefits of the agreement against its effect on the property.
Much like tower companies engage counsel to work through such decisions and issues that arise during contract negotiations, it often helps for property owners to engage counsel to guide them through the negotiation and risk mitigation process.
— Matthew Kwasman, Associate at Nason, Yeager, Gerson, White & Lioce, P.A. Kwasman has represented both tower companies and property owners in transactions involving the purchase, sale and lease of real property focused on the placement of telecom towers. Before joining the firm, Kwasman was a supervising attorney at American Tower Corp. (ATC), where his practice focused on protecting the legal affairs of ATC, the largest telecommunication tower operator in the U.S.