Each of the lease buyout companies uses their own form of purchase agreement. Some companies require an easement while others will accept a simpler assignment of rents. The form used will determine what interest is being transferred under the transaction. The difference between an easement and an assignment document is set forth in the previous section (“What is the difference between an easement and assignment?”).
After the lease is sold, you, as the landlord, still retain certain obligations under the lease. Ideally, depending on your attorney, you will also maintain certain rights under the lease to ensure that you still maintain some control over the carrier tenants. The lease buyout company will assume the right to collect and receive rents under the lease; however, you as the property owner will want to retain the right to receive funds for any increase in taxes attributable to the carrier’s presence on the property. Also, be sure to retain the right to receive any other fees, e.g. landscaping, irrigation, or utility expenses that might be payable by the wireless carrier.
The goal should be to preserve as many landlord rights under the lease as possible while balancing the lease buyout company’s need for some control over the carrier tenant(s). How much landlord control is needed is often determined by whether the cell site is attached to a building or other structure. If the cell site is on raw land, then the amount of landlord control over the cell site is not typically as important. If the cell site is on a rooftop, then more landlord control may be needed to ensure that the landlord can maintain and repair the building effectively. Some lease buyout companies are more flexible in their terms than others. As such, if you are not able to maintain landlord rights that you deem important, it is prudent to check out other buyout companies, as some forms are more favorable than others.
How does the sale of an easement or lease impact the future sale of the property?
When you sell your lease (via easement or assignment), any subsequent buyers of the property take the property subject to that easement or assignment. This means that future buyers of your property will have to live with the terms of the agreement that you strike with the seller and continue to perform certain obligations of the Landlord under the lease. If the buyer is buying the property to redevelop it, they will not be able to redevelop the property in a way that would adversely impact the cell site lease(s). Thus, a buyer may not be as interested or willing to pay as much for the property as they might otherwise.
We have been contacted by prospective buyers of property who were looking to determine what they could do to remove the cell site. Because the previous owner had sold the cell site lease to a lease buyout company, we advised the prospective buyer that they would be taking the property subject to not only the lease but also the lease buyout company’s easement which continued for more than 20 years after the lease expired.
If there is limited risk that a buyer will want to redevelop the property or the placement of the tower or rooftop site is such that it won’t impact future development, then any prospective buyer will be taking the property subject to the easement or assignment. Typically the practical impact of this is that the buyer will have to accept that the easement is in place but not receive any revenue from it. In this way, it is similar to an easement for an electric transmission tower. The tower is there and prevents development near the tower but the owner receives no revenue from its operation. Because the seller of the property has separately sold the income from the tower, the value of the property is reduced. However, it is our opinion that in most cases, it is better to sell the leases separately because most buyers of property aren’t well informed about cell tower leases and won’t pay the same amount for them as specialized lease buyout companies. So while the purchase price of the property itself will be reduced, the combined sale price of the property and the lease will be greater.
One thing we are frequently surprised by is the number of people who recently bought property who call us to find out why they are not receiving revenue from the cell tower lease on the property. In further investigation, in most cases, those people failed to examine their title report which clearly shows that the easement was conveyed previously. Thus, if you are selling your property and have already sold the lease separately, you should disclose during the sales process clearly that the lease is not being sold with the property to avoid any claims of misrepresentation later.