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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.

Condominium Board Authority - Condo Antenna - Cell Tower Leases

At Cell Tower Attorney, we assist various types of landowners in connection with cell tower leases including private landowners and corporations, religious organizations, school districts, condominium and cooperative associations. A few months ago, the New York Law Journal reported a court decision involving a condominium association’s attempt to enter into a lease with a cell phone company. In the case of Kaung v. Board of Managers of the Biltmore Towers Condominium Association, the court determined that the Condominium Board violated its bylaws when it signed a cell tower lease with Metro PCS for the placement of its condo antena on the building’s rooftop.

Specifically, the judge ruled that the condominium board did not have the authority to enter into an agreement with Metro because the agreement violated a restrictive covenant in the condominium bylaws that limits the common elements, including the roof, to residential uses. Similar to many other condominium buildings, the bylaws required that “the common elements shall be used only for the furnishing of the services and facilities for which they are reasonably suited and which are incident to the use and occupancy of the units.” While Metro and the board argued that the cell phone antennas were incidental to the residential use of the units, similar to land lines, cable and internet services, the court disagreed, concluding that that the provision of wireless communications to the surrounding city was commercial in nature and not incidental to the residential use of the condominium units.

While the above decision may ultimately be appealed, it is instructive for a condominium board seeking to enter into a cell site lease for the placement of equipment or condo antenna on the rooftop or other common areas of the building. Before entering into a cell site lease, the condominium board should examine its existing bylaws to determine if, in fact, it has the right to lease the common elements of the building for telecommunications purposes. To avoid any potential dispute, the board may consider changing its rules or amending its bylaws. This typically requires a majority vote of the unit owners.

Recently, we advised two other condominium boards that were approached by cell phone companies. Ironically, the bylaws had similar restrictions on commercial uses of the common areas. In one of the matters, we assisted the board in amending its bylaws to specifically allow for the lease of the rooftop space to the carrier involved. While there was no opposition to the lease at that time, the board’s actions were an appropriate precautionary matter to avoid a problem in the future.

If you represent a condominium board and are considering a cell tower lease on your building, please feel free to contact us. At Cell Tower Attorney, we can review your condominium bylaws to determine the board’s authority to enter into such a lease. In addition, we can recommend an appropriate course of action to avoid a potential dispute from unit owners in the future. Finally, we can assist you in negotiating and drafting a cell tower lease that protects the board, its unit owners and the building while creating additional revenue on the property.

Cell Phone Carrier- Theft of Utilities

The standard cell tower lease typically includes a provision that requires the cell site tenant to pay for all electricity it uses in connection with the operation of its equipment. This can be accomplished in one of two ways. The first way is through a direct meter, in which the carrier installs its own monitoring device on the landowner’s property that exclusively monitors the carrier’s use of electricity. In this instance, the carrier has its own separate account with the utility company. The second way is through a sub-meter, in which the cell phone carrier installs a monitoring device that attaches to the landowner’s existing meter on the property. This also monitor’s the carrier’s use of electricity, however, the cell carrier’s electricity usage is part of the landowner’s bill with the utility company.

While either of the above scenarios seem to adequately protect the landowner, we have seen many instances where the cell phone carrier finds a loophole in this provision. Specifically, what happens when the cell site tenant uses electricity during its due diligence phase or initial construction or testing phase of the property but prior to the installation of a direct meter or sub-meter? The carrier simply taps into the existing power source and rarely brings it to the landowner’s attention. Moreover, without a monitoring device, there is no way for the landowner to determine how much electricity is actually being consumed by the cell carrier. The result is that the landowner winds up paying for the electricity consumed by the carrier. Depending on the amount of due diligence and preliminary work involved, this can be become expensive to the landowner.

Unfortunately, most landowners don’t closely examine their utility bills and therefore, don’t realize that they are unnecessarily paying for electricity used by the cell carrier. In those instances when a landowner does realize after the fact and bring it to the carrier’s attention, the carrier inevitably challenges the amount of electricity consumed and the associated charges. Hence, the landowner has an extremely difficult time recouping this expense, if at all.
At Cell Tower Attorney, we can assist you in drafting appropriate lease language that addresses a carrier’s use of electricity throughout the term of the lease and avoid the need to seek reimbursement from the carrier afterwards. If you believe that a carrier has illegally used electricity at your expense, please feel free to contact us. We can assist you in negotiating a settlement with the cell carrier for prior use of electricity and draft lease language to protect you from similar situations in the future.

Landowner's Property and Utility Company Easements

A client recently approached us for advice regarding a consent letter he received from one of the major cell phone companies seeking to place antennas on a transmission tower owned by the utility on his property. The letter stated that the cell phone company had recently entered into a lease agreement with the utility company for the use of the utility-owned tower within the easement granted to it by the landowner over 60 years ago. While the letter was requesting the landowner's consent to file its zoning application for the cell phone company’s use, it did not have any terms and conditions nor did it offer any compensation for the consent.

The general language of the easement granted the utility company certain rights of use, however, it did not permit the use of the easement for telecommunications purposes nor allow the use by third parties. After further discussions and negotiations, the cell phone company ultimately agreed to enter into an easement agreement with our client which included among other things, a monthly rental payment at market rates.

Based on our experience in assisting other clients, we believe that this type of scenario is happening frequently throughout the country. To their detriment, many unknowing landowners assume incorrectly that the cell phone company has the right to use their property and that they are not entitled to any compensation. We suspect, however, that in many instances, the cell phone company does not have such rights and will only negotiate with a landowner when it is brought to their attention. In certain cases, we have found that the cell phone company never even contacted the owner at all and just installed their equipment.

If you have been contacted by cell phone company that has entered into a similar arrangement with a local utility, we can assist you in determining what rights, if any, you have to legally protect your property and seek compensation.