Don’t Be Fooled By E-911 Language

The major U.S. wireless carriers are fast at work installing their 4G LTE upgrades and modernizing their networks to improve the speed and capacity. This is a massive project requiring carriers to touch all or most of their cell sites. Across the country, consultants hired by the carriers are contacting cell site landlords with Letters of Authorization, Letters of Consent or proposed amendments. Landlords should be sure to check their leases before signing any documents received from the carrier consultants. Often these documents are presented as “standard” and no reference to the specific types of modifications or their impact on the subject property are explained. Depending on your lease terms, some of the terms may be negotiable and/or an amendment may be required.

Recently, our clients have requested that we review many such amendments. What we are finding is that the carrier amendments many times include terms that are not tied directly to the modification, but go further to modify the lease terms more favorably for the carrier. For example, AT&T amendments we have seen include a provision entitled, “Emergency 911 Service”. At first glance, it seems neighborly to allow AT&T to make emergency 911 modifications to its cell site that are mandated by the government. However, a more careful reading reveals that the language proposed by AT&T is much more broad than strictly emergency services. AT&T’s language provides in part that, for no additional rent, the Landlord agrees that AT&T “may add, modify and/or replace equipment in order to be in compliance with any current or future federal, state or local mandated application, including but not limited to emergency 911 communication services”. Note some of the key words, “including but not limited to.” This language is not precise and is therefore open to interpretation. One could interpret AT&T’s language such that AT&T’s addition of a generator to the subject cell site is permitted, especially if it is part of an E-911 mandate. However, bringing a generator to a property can have substantial implications, including added land owner liability. What if there is a gas or diesel spill? Will the generator make noise? What if the generator emits strong odors? Where will the generator be placed? Will additional space be required beyond the lease area? Will the Landlord be obligated to yield such space without additional rent?

Another term Landlords may want to consider when reviewing AT&T amendments is whether the Landlord wants to require AT&T to remove the Memorandum of Lease from the title record of the subject property upon expiration or earlier termination of the AT&T lease. AT&T’s amendments often seek to permit “either party” the right to record a new Memorandum of Lease. While some property owners refuse to let such Memorandums be recorded on their property, another solution is to require carriers, such as AT&T, to cause the Memorandum of Lease to be released from the property via a quit claim instrument or as otherwise may be requested by the local recorder’s office. Such release should occur within a set time period after the expiration or termination of the lease. If the carrier does not remove the Memorandum during such time period, the Landlord should include the right to act as a power of attorney on behalf of the carrier, at carrier’s sole expense, to cause the Memorandum to be released from title.

Finally, pay close attention to when the increased monthly rent commences. In recent AT&T amendments, we have seen that rent commences when AT&T commences installation of its equipment, however, if AT&T is leasing additional space, then rent should commence when the amendment is effective (typically full execution). If you, as the landlord, are keeping space for AT&T’s use, but AT&T does not install its equipment for more than a year, you have kept the space for AT&T’s use without compensation for that year. Essentially, such language serves as a free option for AT&T to preserve space for its future modifications.

 All of the carriers have their own template amendments so be sure to read through the “standard” templates carefully. Remember, the carriers have their own attorneys looking out for their interests so you must be mindful to watch out for your own interests. If you would like us to review your lease to see if an amendment is required for the carrier’s proposed modification or review an amendment on your behalf and ensure you are adequately protected, please do not hesitate to contact us for more information.

Please note that “AT&T” is a registered trademark owned by AT&T Intellectual Property and/or AT&T affiliated companies. Cell Tower Attorney is not affiliated with AT&T in any way and the blog post above is offered strictly as an opinion. If you wish to learn more about AT&T, please go to www.att.com.

The Impact of Tower Revenue Projections on Private Landlords

An article was recently published at Fiercewireless.com (Towering Revenue Projections for 2011, June 4, 2011) which stated that United States tower companies such as American Tower and Crown Castle were gearing up for an increase in revenue this year. This is a surprise to many in the industry given the fact it was widely accepted that new site builds were going to be significantly lower than in years past due to various factors, most importantly, the merger between AT&T and T-Mobile. In fact, some of our clients were recently informed that leases that were under negotiation had been placed on hold. In addition, we received emails from leasing agents in various markets throughout the country confirming that both AT&T and T-Mobile were not leasing new sites for the near future.

The article explained that the increase in revenue is attributable to the expansion of existing sites as a result of LTE or next generation technology deployments. Tower companies are very sophisticated landlords and purposely negotiated their original leases with carriers to require amendments and accordingly, additional compensation for the right to expand the leased premises and/or collocate additional equipment on the tower. Based on the foregoing, industry forecasters predict that revenue growth from amendments for site expansion and additional equipment will far exceed revenue growth from new tower additions.

Generally speaking, this is good news for our clients as the carrier expansions on tower company-owned structures will also find their way to private tower owners and landlords with carriers on their rooftop. The question then is if your cell tower tenant is interested in placing additional equipment on the tower on your property or on your rooftop, are you entitled to additional compensation? Clearly, if the carrier is looking to expand the leased premises, the landowner’s consent is required and you are entitled to additional compensation. In cases where the carrier is looking to add equipment within the leased premises, the answer is not a simple one. Rather, it depends on the language in your specific cell tower lease. Accordingly, the first thing we always ask our clients do is review their existing cell tower lease and determine if site modifications are covered in the lease. In some leases, site modifications are not covered and therefore, the carrier most likely has the right to add equipment without your consent and without paying additional compensation. In other instances, the carrier has the right to make such modifications, however, they are subject to the landlord’s consent which may not be unreasonably withheld, conditioned or delayed. Some States have interpreted such language to mean that you cannot ask for compensation for your consent. In other States, it means that you simply can’t ask for an unreasonable amount of compensation. In other leases, the language clearly states that the carrier does not have the right to make the modifications under the existing lease and the landowner may deny the consent in its sole discretion. Accordingly, the landowner may demand additional money in exchange for providing consent. Unfortunately, we find that in most cases when a landowner is approached to consent to site modifications, the carrier does not provide sufficient details about the proposed modifications nor do they offer compensation or justification for the consent. At Cell Tower Attorney, we can review your existing lease and determine what rights or obligations you have regarding a request for a site modification.

Sprint Nextel to Possibly Lease Space on its Network- Impact on the Landowner

According to a number of recent news reports, Sprint Nextel is in talks to lease space on its wireless network to LightSquared and Clearwire Corporation. While on the surface it may seem irrelevant to a landlord/owner of a building or property who has Sprint Nextel as a tenant, it may actually impact the landowner’s cell tower lease as well as raise possible questions or concerns.

Every Sprint Nextel lease across the country has a provision governing Sprint Nextel’s right to assign the lease and/or sublease its premises. Depending on the specific language in the lease (and how well you negotiated the language prior to lease execution), the landowner may have the right to restrict Sprint Nextel’s right to sublease its premises. In addition, the landowner may be entitled to additional compensation in the event of a sublease. The foregoing raises the following question: If Sprint Nextel subleases space on its network to a third party such as LightSquared or Clearwire, does it trigger the sublease provision of the lease and possibly require landowner consent or require Sprint Nextel to pay additional compensation to the landowner?

To answer the question, one needs to first clarify whether LightSquared or Clearwire will actually be housing its equipment within the Sprint Nextel premises or simply leasing space on the Sprint Nextel network without actually placing its equipment on the leased premises. If LightSquared or Clearwire is housing its equipment on the premises, then I believe the answer is relatively straightforward. The sublease provision of the lease is clearly triggered and if the lease in question requires landlord consent to sublease or requires the payment of additional compensation, Sprint Nextel must comply with such a provision. Sprint Nextel, on other hand, will argue otherwise. For example, it may claim that a “Contract Affiliate” relationship exists between Sprint Nextel and either LightSquared or Clearwire, which is defined in the standard Sprint Nextel lease as “any entity that is authorized to sell telecommunications products or services under the “Sprint” or “Sprint PCS” or “Nextel” brand name or any successor brand name(s) or other brand name(s) used or licensed by Tenant’s parent corporation.” In addition and specifically with respect to Clearwire, Sprint Nextel may argue that because it owns part of Clearwire, the use of a portion of its leased premises by Clearwire is not actually a sublease because the companies are one and the same for purposes of the lease. To counter these arguments, I recommend that the landowner inquire as to whether a separate lease exists between Sprint Nextel and LightSquared or Clearwire (ask either company to provide a copy of such agreement) and if there is any consideration given by LightSquared or Clearwire to Sprint for use of the leased premises. These are factors that would support the notion that a sublease exists between the parties.

If Sprint Nextel is merely leasing space on its network and not actually subleasing a part of its premises, the answer is even less clear. Sprint Nextel will undoubtedly rely on a strict interpretation of the lease and argue that the subleasing provision of the lease only applies to situations where it is actually subleasing its premises to a third party and therefore, the leasing of its network (not the premises) does not require landowner consent nor the payment of additional monies.

As an attorney who represents cell site lease owners, I would argue that the lease is unclear or ambiguous on this particular issue and therefore, one must look at the intent of the parties when the lease was originally negotiated. By specifically imposing a restriction on Sprint Nextel’s right to sublease or requiring additional compensation for such a right, the parties’ intent was that the rights granted to Sprint Nextel under the lease were personal in nature and therefore, no other third party should be able to utilize the rights exclusively granted to Sprint Nextel. Moreover, the Sprint Nextel network, by definition, is simply an aggregate of thousands of landowner leases which contain equipment that continuously emit radio frequency signals. In other words, the network and the cell site leases (of which the landowner’s property is one) are synonymous. Accordingly, the leasing of space on the Sprint Nextel network to LightSquared or Clearwire is effectively the same as subleasing part of its leasehold premises to LightSquared or Clearwire. The fact that technology has evolved to the point where a third party signal can be transmitted across the Sprint Nextel network without actually occupying physical space on the leased property should not unfairly harm leaseholders and unjustly enrich Sprint Nextel. Based on the foregoing, I believe that one can make an argument that the sublease clause under the Sprint Nextel lease would be triggered in the event Sprint Nextel leased space on its network to LightSquared or Clearwire and therefore, landowner consent may be required and possibly the payment of additional compensation. I suspect that this will become a controversial issue in the weeks and months ahead if Sprint Nextel moves forward with such a plan.

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The role of the SNDA in Cell Tower Leases

At Cell Tower Attorney, we represent landowners exclusively. Our work is primarily focused on the negotiation of new cell tower leases, lease buyout agreements, and cell tower lease amendments. In connection with these transactions, the carrier, tower company or lease buyout company may include a clause requiring the landowner to obtain a Subordination, Non-Disturbance Agreement or “SNDA” from its lender on the property. We are frequently asked by our clients to explain what a SNDA is and what purpose it serves. Simply put, an SNDA is an agreement that is entered into by the bank or lender of the landowner in which the lender agrees to honor the cell tower lease or buyout agreement in the event of a foreclosure on the property. Without such an agreement, the cell tower lease or buyout agreement is at risk of being extinguished in the event of a foreclosure because the bank’s interest in the property is always superior to the cell phone or buyout company’s interest.

Given the economic downturn of the last two years, the foreclosure rate in many states is at an all-time high. Because of the heightened risk of foreclosure, many banks are non-responsive when approached with a request for a SNDA or unwilling to execute such a document which can make it frustrating for landowners and cell phone companies alike. In fact, when we negotiate lease language, we only agree to include language that requires our clients to use “commercially reasonable efforts” to obtain a SNDA because we cannot guarantee that the lender will be cooperative with such a request. For some cell phone tenants this language is sufficient, however, others are insistent upon the landowner obtaining the SNDA prior to executing the lease. This can lead to extensive delays in finalizing a lease or buyout agreement and in extreme cases, result in losing the lease or agreement entirely. If you are a landowner who is approached by a cell phone carrier, tower company or lease buyout company, you should familiarize yourself with the SNDA issue before moving ahead with the transaction or unnecessarily spending money on an attorney to review the proposed lease or buyout agreement.

MD-7 and T-Mobile Cell Tower Lease Renegotiations

Our law firm has recently been contacted by landowners with T-Mobile or Sprint Nextel leases on their property who have approached by a company called MD-7. On behalf of T-Mobile and Sprint Nextel, MD-7 sends letters to these landowners proposing to modify the existing lease and the reasons why the landowner should consider such modifications. In every case, the justification provided for such modifications is that the wireless carrier has the right to terminate the cell tower lease at any time on short notice and the modification is the only way to ensure that the site will remain in the carrier’s network.

The modifications typically involve one or more of the following: a reduction in the rental amount or escalation, a rent guarantee period, an increase in the number of antennas or equipment on the leased premises, and/or an extension of the term of the lease.

In our dealings with MD-7 and based on feedback from our clients, their sales agents frequently use high pressure sales tactics to pitch their offers, calling on a daily basis and creating artificial deadlines in which landowners must make a decision. In one particular instance, the MD-7 agent assured one of our clients that retaining an attorney to review a proposed amendment was not necessary. This was quite disturbing to hear given that the amendment would impact the property for over ten years or more and may significantly reduce the expected revenue for the lease over that time period. Based on the substantive nature of the lease modifications proposed and the fact that MD-7’s agents are strictly representing the interests of the carrier (not the landowner), such a statement is clearly false and misguided. On the contrary, any landowner that is approached by MD-7 should take the necessary time to evaluate the financial impact as well as the impact on the property of entering into an amendment with MD-7.

In many cases, the existing cell tower lease is completely safe and the landowner is not at risk of losing the lease. Finally, if you are considering modifying your cell tower lease, please seek the advice of an attorney to review the proposed amendment to make sure that document is consistent with your expectations and so that you are not unnecessarily increasing the carrier’s rights and your liability on the property.

Cell Tower Lease Buyouts- Beware of Hidden Closing Costs

At Cell Tower Attorney, we have assisted many landowners throughout the country in connection with cell tower lease buyouts. In light of the economic downturn over the past year, there are currently only a handful of companies actively buying cell tower leases. Those companies that are purchasing leases are fully aware of the lack of competition in the industry and therefore, are offering lower purchase prices than a year or so ago and are much more restrictive on terms and conditions of their standard purchase agreements. For unknowing landowners who have little or no experience with such a transaction, they may mistakenly believe that such tactics are “industry standard”.

For example, we have seen multiple instances in which landowners have been charged with various closing costs such as recording or conveyance taxes, title search, and escrow fees associated with the sale of their cell tower lease. Instead of receiving the actual purchase price for the lease, the landowner receives as much as $10,000 less than this amount. In every case, the term sheet that signed by the landowner did not disclose such fees and the landowner was only made aware of the closing costs months later and just prior to closing. Because landowners are obviously anxious to close on the transaction and do not want to start the process over with a new buyer, they simply agree to the closing costs.

As a matter of good faith, we have demanded that the lease buyout companies disclose any closing costs that are the landowner’s responsibility at the beginning of the lease buyout process. Despite our demands, we still frequently review executed term sheets which are silent regarding this issue.

If you are a landowner in the process of selling your cell tower lease, you should make sure that the term sheet you sign discloses all business terms and conditions as well as clearly describes any and all closing costs and the party that is responsible for such costs. If you are considering selling your cell tower lease, please feel free to contact us. At Cell Tower Attorney, we can review the cell tower lease buyout term sheet and make sure that there are no hidden costs or other terms and conditions. In addition, we can assist you in negotiating and drafting a cell tower lease buyout agreement that protects you and your property while maximizing the sale price for the cell tower lease.