Why Cell Phone Companies Dislike Lease Buyout Companies
In recent years, lease buyout companies such as Unison, Wireless Capital Partners, Communications Capital Group, and Landmark Dividend as well as some cell tower companies like Crown Castle and American Tower have been aggressively purchasing cell site leases from landowners across the country. In most instances, the lease buyout companies purchase an easement in the property and take an assignment of the cell site rental income.
Specifically, the transaction involves the lease buyout company purchasing discounted cash flow from your current cell tower lease in the form of a one-time, lump sum payment in exchange for an assignment of the future cell site rent. This may be for a fixed term (30,40, or 50 years) or perpetual.
By signing the Easement Agreement, you -- the landowner -- grant the buyout company an exclusive easement over your property for the transmission and reception of all wireless communication signals and the construction and operation of towers, antennas and related facilities. More importantly, you agree to forfeit all rights to collect the future rent payments during the term of the Agreement. These companies utilize many different tactics to convince you to sell your cell site lease, like insinuating a possible risk that the lease will be terminated due to technological obsolescence or cell phone company consolidation and merger.
Although they may be willing to pay large sums of money for your lease rights, you might be surprised to learn that many landowners or tower owners mistakenly “sell out” for well below market value. There are several other factors you need to seriously consider as well. That's precisely why it's always advisable to seek professional, experienced counsel before moving forward with a sale of your cell site lease.
As the existing leaseholder, you and the cell site tenant maintain a landlord/tenant relationship. The carrier has paid you a monthly rental fee in exchange for exclusive rights to the leased premises and non-exclusive rights for utilities and ingress/egress from the property.
It is important to remember that when you sell the revenue stream to a lease buyout company, you are not necessarily selling your obligations and responsibilities under the original agreement with the carrier. You, the landowner, remain the fee owner of the property and therefore must comply with all landlord obligations under the existing cell site lease. It's the carrier's concern, however, – and rightfully so – that you may be far less motivated to fulfill those commitments when the lease is sold to a third party. In other words, the lease buyout company disrupts the existing relationship between the landowner and the cell site tenant.
As evidence of their disdain for lease buyout companies, some cell phone carriers include a Right of First Refusal in their leases with landowners. This means that you, the landowner, are obligated to first approach the cell site tenant before you accept an offer from a lease buyout company. In this instance, the carrier reserves the right to match the offer on identical terms and conditions. In fact, some cell site leases include language stating that you cannot assign the lease to a 3rd party without selling the entire parent parcel, effectively preventing the sale to lease buyout company.
Verizon Wireless in particular, is taking direct action against these types of lease buyout agreements. The carrier not only includes the Right of First Refusal clause, but upon being notified of the sale, will send the landowner a missive reserving its right to question the legality of the sale of the landowner's right, title and interest in the cell site lease to a lease buyout company.
Again, the fear is that you won't be as diligent in meeting your obligations under the original contract since you are no longer receiving the monthly rent payment.
Lastly, the carrier knows that once the lease is sold, it must direct any questions or concerns about the property to the lease buyout company. Most importantly, this includes any proposed site modification or expansion of the premises. Unlike a typical landowner, the lease buyout companies are extremely knowledgeable of the telecommunications industry and are staffed with shrewd negotiators, which make it much more challenging for a carrier to negotiate for additional entitlements.
For more information on how to best to evaluate and negotiate a lease buyout offer, consult the industry experts at Cell Tower Attorney.