Friday, January 18, 2019
Presently, over 300,000 cell/wireless towers have been erected in the United States. Some of those are on farm and ranch land with the landowners having been presented an agreement to sign allowing the wireless carrier to use of some of the land. But, not all agreements are created equally.
What makes a cell/wireless tower agreement a good one? What are the key elements of a good agreement? What should or should not be included in an agreement from the landowner’s perspective? These questions are the topic of today’s post.
The Battle of the Forms
A key point for a landowner to understand is that when presented with an agreement to sign, the standard form of the wireless carrier is one-sided. It is one-sided in the favor of the wireless carrier. That’s to be expected. After all, a maxim of contract law is that the party who drafts a contract drafts the contract in their favor. So, a wireless carrier, via a landowner agreement, will attempt to take as much advantage of a naïve landowner as possible. That means a landowner presented with a wireless carrier’s boilerplate form could incur substantial legal fees to have the form edited in the negotiation process to reach a more balanced agreement that protects the landowner’s property rights.
A better approach might be for attorneys that represent landowners to develop their own standard form that thoroughly protects a landowner’s property rights while also ensuring that the wireless carrier can still experience an economic benefit from the placement of the tower on the landowner’s property.
There are a couple of basic points to be made when drafting a cell/wireless tower agreement. These are: 1) clearly identify the premises that is subject to the agreement; and 2) clearly identify the grant of authority. An exhibit should be included with the agreement that contains the legal description of the subject property along with drawings and/or photos. The more detail that is provided, the easier it will be to police the agreement. That’s particularly true with respect to unauthorized collocations (the placement of additional electronic devices on a tower) and subleases. In addition, any standard agreement should address the usage of common areas and access points. Similarly, the landowner will want the retained right to control signage, conduct and look. Nobody wants an eyesore on their property.
The grant of authority to the carrier involves the property rights that are given to the company. The grant of authority should be either a license or a lease. An easement should not be granted. The grant of an easement may result in granting others access to the same property. Instead, a license is all the legal authority that a wireless company needs. A license simply gives the wireless company exclusive permission to enter the property to establish the tower and perform necessary maintenance activities. A lease can also be utilized if it grants exclusive use to the wireless company and not shared use. In addition, a lease may provide more protection to the landowner in the event of the bankruptcy of the wireless company.
Whether a license or a lease is utilized, some basic elements should be included in the document.
Term. The term of the agreement and any renewal options should be clearly specified. For larger installations of wireless towers, the term is typically a series of five-year terms totaling somewhere between 20 and 30 years. For smaller installations that are placed in a right-of-way, a shorter term is generally better because of uncertainly that may exist due to governmental regulatory authority. Each particular situation will be different in terms of that the optimal term will be, whether an automatic renewal clause should be included and whether actual affirmative notice should be required of renewals.
Care should be given, however, to the use of a clause that gives the wireless company the “option to lease” or a clause that provides for a long “due diligence” period. The problem with those clauses are that they can tie up the site for a set amount of time with no guarantee of rent flowing to the landowner. Relatedly, a landowner should not allow the wireless company to have a long delivery or construction period for obtaining the necessary permits without requiring additional compensation. Ideally, the term of the agreement should begin immediately with a construction period of 30-60 days being added to the overall term.
If the wireless company desires either an option to lease or a due diligence clause, such a clause should be negotiated as an addition to the basic agreement for additional compensation. For instance, a “due diligence” period is a timeframe that the wireless company is given to obtain the necessary legal clearances and ensure that the location works for the company. This landowner should not give this time period away without additional compensation, even if the underlying agreement is not yet in force. Likewise, during this due diligence period, the landowner should consider requiring the wireless to carry insurance for any activities on the site by the company or consultants (and require copies of consultant reports be provided to the landowner), require prior written consent for any borings, and require the wireless company to indemnify the landowner for liability arising from the conduct of the company or consultants, etc.
Rent. The amount of rent or license fee paid to the landowner will depend on whether the installation is inside or outside the existing right-of-way. If it is inside the right-of way, the amount should be a reasonable approximation of cost. If it is outside the right-of-way, it will likely be tied to the market rate. In either event, a landowner should do the necessary “homework” to determine what an appropriate level of compensation should be, but the landowner’s compensation should be comprised of a base amount with additional compensation for collocation (additional devices added to the existing structure). In addition, a provision for late fees, interest and the possibility of holdover should be included in the agreement. Late fees are essentially whatever the landowner is able to negotiate, with interest on late fees typically limited by state law. A “savings” clause should be included to ensure that a state law barring usury won’t be violated. The hold-over rent amount will likely be in the range of 125 percent to 150 percent of the rent amount at the time the hold-over began.
Assignment. Often, the wireless company will desire to assign the lease to another related (affiliate) company, such as a “tower operating company.” Any assignment should require the landowner’s written approval. One option for a landowner to consider is to execute a property management agreement. But, in no event should the landowner agree to release the original wireless company from responsibility for liability associated with hazardous chemicals (battery leakage, etc.) and insurance.
Relatedly, a landowner should not allow the wireless company to sublicense or sublease without the landowner’s prior written approval. In addition, the landowner should retain the ability to consent to any proposed sublicense or sublease involving the placement of another carrier’s equipment (“facilities”) on the existing tower (or other structure). If additional equipment is desired to be placed on the existing tower or structure, additional rent or fees should be paid to the landowner.
Interference. The landowner is legally obligated to provide the tenant with “peaceable possession” of the premises. “Peaceable possession” means that the landowner will provide the premises to the tenant in a condition that will serve the intended purpose(s) of the tenant’s use. As applied to cell/wireless tower license or lease situations, that means that the landowner should not cause any interference problems for the existing tenant or licensee. For facilities and structures that are outside of a right-of-way and entirely on the landowner’s property, the landowner should ensure that subsequent tenants/licensees (collocators) do not cause interference. While the legal burden is on a newcomer to cure interference issues that are caused by the subsequent placement of a facility on an existing tower/structure, the landlord should take steps to ensure the landlord’s non-responsibility for interference or curing the problem. Also, the landlord should ensure that no rights have been granted that could lead to an interference.
Improvements. A significant area of concern for landowners is how to deal with improvements that the wireless company may desire to place on the tower/structure after the initial installation. Any proposed improvement should require detailed plans with prior approval and, of course, additional compensation for the landowner. The landowner should not agree to clause language such as, “approval not to be unreasonably withheld, delayed or conditioned…”. Also, the landowner should control the appearance of any improvements, and require that any improvement by the licensee/tenant be performed in compliance with applicable laws, codes and ordinances. In addition, the licensee/landlord should not be authorized to contract for or on behalf of the licensor or impose any additional expense (such as utilities) on the landowner.
The landowner should ensure that improvements will be maintained and upgraded to continuously be in compliance with applicable laws, and that any new installations will not be heavier, or exceed capacity or space than the original grant permitted. Similarly, the agreement should specify that the wireless company pay for utilities and that the landlord is not responsible for any interruptions in cell/wireless service. Concerning an operational issue, the landowner should not allow the wireless company to use the landowner’s electric connection with a submeter.
Access. The landowner should make sure that the agreement provides sufficient protection related to access to the property. In general, it is advisable to require the landowner to be given 24-hour notice when access to the property is desired or will be occurring. In addition, access to the property should be limited to just what is necessary to accomplish the purpose of gaining access. Also, some provision should be included in the agreement for emergency access to the property. If the wireless facilities are installed on the roof of a building, access to the facilities should be limited to just those areas that the wireless company needs. In addition, if the facility is placed on the top of a commercial building the roof contractor should approve of the access and roof penetrations should be avoided that could possibility invalidate roof warranties. Relatedly, the size, weight and frequency of roof access should be limited. If the installation of the cell/wireless facility is on private land (such as farmland), access should similarly be limited, and provisions included to protect fencing and animals, for example. The burden of maintaining secure fencing should be on the wireless company.
Default. The agreement should provide for events of default and termination by the landlord. Common events of default would be the non-payment of rent by the wireless company or habitual late payments. Likewise, default could be triggered on the violation of any term of the agreement, including non-permitted collocations and the bankruptcy of the wireless company. Consideration may need to be given as to whether a clause should be included that allows default to be cured by a monetary payment provision.
Care should be taken to clearly specify how and when the wireless company can terminate the agreement. Commonly, wireless carriers want a provision included in the agreement that allows them to terminate the agreement for “technological, economic, or environmental” reasons. A landowner should not accept this clause. It is a “get out of jail free” clause for the wireless company. From the landowner’s perspective, the agreement should either bar terminations by the wireless company or allow it for an additional payment (such as rent for the balance of the then-existing term or an amount of rent equal to a year or two).
Decommissioning. Thought should be given in the agreement concerning the ultimate removal of the tower and related improvements. Removal should also apply to improvements that have been made beneath the surface of the property. The manner of removal may depend on the type of facility that has been erected. If possible, the agreement should provide for immediate ownership of the facility/improvement in the landowner (although this likely won’t work if the structure has been added to a light pole that is on the landowner’s property located in a right-of-way). Alternatively, an option can be included in the agreement for the landowner to retain improvements or require removal of structures, footings and foundations.
Miscellaneous provisions. A well-drafted agreement should contain provisions dealing with numerous other issues. The following is a breakdown of the major “miscellaneous” provisions:
- Insurance provisions should apply to contractors and subsidiaries without reciprocal indemnity (which may be banned by state and/or local law). It’s a good idea to have insurance professionals review the insurance provisions.
- A tax provision should clearly state that taxes due are in addition to the rent amount due under the agreement. Likewise, the agreement should make the wireless company pay any increase in any property tax or insurance as a result of the installation and associated improvements.
- A “notice” provision should require that all notices, requests, demands and other communications be in writing and delivered to a specific address, and have multiple government entities copied (such as the city/county clerk; county/township/city engineer, etc.).
- Clause language should be included to limit the ability of the wireless company to store items on the property. This is an environmental concern. Stored batteries and generators can leach, and diesel fuel can leak.
- A provision should be included for attorney fees.
- Give thought as to whether a severability provision should be included as well as a clause providing that the landlord is not liable for brokerage or agent fees.
- A governing law provision should specify that the governing law is where the premises subject to the agreement is located and that jurisdiction is in the state rather than federal court.
- Other clauses to consider include a mortgage subordination provision; a clause providing for the limitation of liability; no relocation assistance (condemnation payments need to go to the landlord); and that time is of the essence.
- A provision addressing the sale of the agreement.
- It might be a good idea to include a provision addressing the possible sale of the agreement.
Perhaps the biggest key for a landowner in achieving a good agreement with a cell/wireless company is to control the drafting process. A good agreement can produce a good economic result for a landowner. A bad agreement that is not put together well can result in undesireable situations for the landowner. Good legal counsel is a must in getting a good agreement that will provide long-term benefits.