Wireless Space Rights Lease Provisions
The main purpose of wireless space rights lease provisions is to provide the facility developer with quality real estate entitlement on each property. Each of the standard provisions discussed in this module serves to support that end. Preparation is a requirement to explain a wireless facility lease to a property owner and to draft one to present to a property owner. Starting from the beginning of the form, the legal name, address, and type of entity for each lessor and lessee needs to be known and inserted in the agreement. Each party may be a form of a corporation, partnership, or limited liability company, or one or more individuals or a trust. Wireless facility developers often do business through different legal entities between states or markets. Wireless carrier entities may take the form of partnerships with the carrier operating as the general partner or holding company of multiple subsidiaries. Likewise, wireless site investors, site developers, and site operators commonly divide development projects among separate entities as subsidiaries of the holding company. Subsidiaries might be named based on their timing or source of funding. Any number of types of entities might define property owners. Individuals who are property owners are usually identified by their marital status. Married couples are identified as husband and wife. State laws vary regarding how married couples can hold property together. Joint tenancy and tenants-in-common are two typical forms of ownership for couples and for unmarried individuals who own property together.1
Most wireless facility leases are written to ensure that the property owner agrees to lease space—known as the lease area, the premises, or the land space—for any and all purposes that are consistent with how wireless communication sites are built, operated and maintained. The space is expressed in dimensions that may be approximate and can be characterized on a survey or sketch attached to the agreement as an exhibit. For macro cell site facility leases, space is needed for cables to connect antenna space to associated equipment space. For micro cell site structure leases, less associated equipment space needs to be arranged.
Right-of-Way Easement Rights
For access purposes macro cell site ground lease agreements need rights-of-way and easements on, over, under, and through the property and the property owner’s adjoining parcels for vehicles to get to the facility from the nearest convenient public road. The site operator may require additional rights-of-way and easements to extend electricity, telecommunications, and other utilities, such as natural gas. Rooftop leases require rights to access the associated equipment, antenna space, and connecting cables. Access outside of normal business hours is typically required only in case of emergencies. Access to micro cell sites is the ability to get to the equipment at the antennas and cabled environments on the property.
Macrocell site agreements need space to park vehicles on or about the lease space and adjacent areas during periods of construction, site inspection, and necessary repair work. Facility operators want parking spaces in or near building parking. The ability to park close to equipment lightens the burden to carry heavy tools and diagnostic equipment between a vehicle and the operating equipment.
Macro cell site agreements for guyed towers depend on the space and right to run guy wires from the tower structure on, over, and across the ground to anchor locations to provide proper support for the antenna structure. This necessitates the right to install underground anchors to secure the guy wires. Guy anchor locations may be part of a large space that includes the structure and facility compound, or they may be the subject of easements separate from the facility compound. Guy anchors may also be necessary to support power poles that extend power on the property.
Right to Fence and Alter Land and Continue Due Diligence
To provide security, wireless facility developers need the right to fence the lease space and, if relevant, guy anchor locations. The access road easement from the public right-of-way to the leased space does not typically require fencing, except for a gate at the point of entry from the public right-of-way. The rights originally established with a right-of-entry consent, such as the right to enter the lease area and adjacent property for surveys, soil tests, and other engineering studies, continue during and after site construction. Rooftop agreements provide the right to partition wireless carrier equipment from unauthorized access.
Development and Operation Rights
Wireless facility space agreements have to specify the site operator’s right to construct, maintain, and repair a roadway in the access easements (including grading and drainage) and the right to install poles, wires, pipes, cables, conduits, and related attachments to secure provision of electricity, telecommunications, and, if necessary, natural gas. As stated, the space rights need to include the right to place guy wires and guy wire anchors as approved by the property owner and the right to relocate guy wires and guy wire anchors in the lease area in the event the structure height increases, decreases, or is relocated.
Graphic depictions and alphanumeric descriptions characterize space rights exhibits for wireless facilities with respect to the parent property. Compare the deeded parent property legal description to the legal description in the title commitment for accuracy. If the property is surveyed or a survey already exists, compare the survey to the current deed and the title report. If differences exist in the legal description between the deed, the title report, and the survey, be sure to understand the reason why and clarify if any correction is necessary.
Each space agreement must specify how the contract is initiated, the commencement date, and when consideration payments start. Space rights must be in place before the facility developer starts to prepare the property for construction. Most standard wireless facility space agreements are designed so commencement, and rental payments may be delayed until a predetermined time.
One notable aspect of contract law is that agreements may not be enforced until or unless one party has received something of value from the other party in exchange for something else. Therefore, facility developers are willing to pay a nominal amount to the property owner upon completion of a fully executed facility space agreement, constituting legal consideration.
Rent is usually paid in equal monthly installments, even though space agreements typically specify it in terms of an annual amount. Property owners may ask—and some wireless facility operators may agree—to make a single annual payment each year. Some property owners read more…
Length of Lease Terms
The initial term of a wireless facility space lease (commonly five or ten years) is set apart in the agreement from the lease extension terms (commonly four to nine five-year periods). Tower site owners or managers, operating as master tenants, need more remaining time on their master site leases than new wireless tenants, as discussed in Module 11 Lease-ability.
Friction sometimes exists over guaranteed rental increases. Originally, 15 percent rent increases at the time of a five-year renewal were common. In the past fifteen years, wireless carriers have reduced those increases in new agreements to 10 percent every five years and eliminated the increases entirely when able. The wireless industry continues to become more competitive. Be sure to understand how to work with your client’s policy for rental negotiations.
Right to Protect Interest
When a property owner defaults on obligations such as taxes, assessments, or mortgage payments, a wireless facility operator may be willing to pay the obligation to protect its space rights interest in the property. Otherwise, the status of a space rights lease could be jeopardized if the property is seized in lieu of a debt.
To guard against a lease being terminated by the property owner for default, wireless tenants deserve to receive a written notice and time to cure any breach of contract for which they may be responsible.
Cancellation and Termination Rights
While property owners are asked to commit to a wireless facility space for twenty-five to fifty years, wireless facility developers require the right to cancel or terminate leases for multiple reasons with as little as ninety days written notice. Wireless site operators can’t afford to allow property owners the right to terminate a lease at will.
While a wireless facility developer may be a wireless carrier, a tower company, or an investor/entrepreneur, an opportunity exists for groups of wireless facility space leases, including structures, to be sold to large tower companies or new entrants in the towerco sector. There is a history of wireless carriers being consolidated from regional ownership into national ownership and of wireless carriers selling large groups of sites to towercos. A history also exists of small or regional wireless site investors or entrepreneurs selling wireless facility assets and space rights to the larger national tower companies. In some cases, the national towercos have purchased entire smaller or regional tower companies that developed profitable wireless facilities with quality real estate entitlements.
Peaceful and quiet enjoyment is an easily understood legal term usually attributed to lease rights. Property owners, as landlords, must agree to allow wireless facility operators to conduct normal business activities without interference. This applies in a similar manner to subordination and non-disturbance agreements, as discussed in Module 26 Miscellaneous Agreements.
Personal property is represented by equipment that is not fixed to the ground. In fact, communications towers are commonly considered personal property for tax purposes, not a portion of real property, because a tower can be removed at or above ground level from its foundation.1 This is known as decommissioning. While concrete foundations can be removed, it involves demolition.
As referred to above, wireless facility developers are willing to agree to restore the property to its original condition upon termination of a space rights lease. It is good business practice. Prospective property owners and local permitting jurisdictions commonly ask what will happen when the lease ends or the facility is no longer needed.
Indemnification and Hold Harmless
Indemnification and hold harmless terminology regards withholding the placement of blame for actions that cause damage or loss. In a lease agreement between two parties, one or both parties may agree to indemnify and hold harmless the other party for actions that result in damage or a loss but aren’t the other party’s fault. This absolves an innocent party from liability for damage to property or loss of life arising from a guilty party’s use or occupancy of the property. The employees, agents, contractors, or invitees of each party are typically included within the scope of each party to the agreement.
Wireless facility developers and operators must carry insurance due to the risks involved in operating a business. Wireless facility developers also expect property owners to carry insurance on their property. If a loss or damage is suffered by an unrelated third party but the property owner has no assets or insurance to cover damages, the third party may be able to seek damages from the wireless facility operator with insurance and deep pockets merely because of its presence or occupancy on the property. Therefore, if the property owner does not have insurance, the wireless site operator is exposed to unpredictable liability, degrading the quality of the space rights entitlement.
Waiver of Subrogation
Subrogation is the ability of an insurance company to seek satisfaction from a third party after paying a claim to its insured arising from losses caused by the negligence of the third party.
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