The Easement – Most lease buyout companies prefer to obtain an easement on the Property to secure their interests in the lease and their right to sublease space within the easement in the future. The easement can either be a perpetual easement or a fixed easement.
Perpetual Easement – Most lease buyout companies will seek a “perpetual” easement. Depending on the state the cell site is located, perpetual has different meanings. For example, in California, “perpetual” will mean 99 years, whereas in some other states, the easement will be in place as long as the rule against perpetuities is not violated. Usually, property owners receive the largest purchase price for the granting of a perpetual easement, however, whether to grant such a term is a question for careful consideration.
Depending on your future plans with the property, in some instances a perpetual easement may be a good idea. One such example is where a cell site exists on raw land that will not be developed and where the underlying property has a low value. However, if the cell site is on a building rooftop and the property upon which the building sits will be redeveloped in future, then granting a perpetual easement may not be the right fit.
Fixed Easement – The majority of property owners we represent grant a fixed-year easement interest to lease buyout companies. Our clients typically find that they can agree to a specific number of years to maximize the value of the cell site lease, while still allowing for some flexibility in the foreseeable future. While the perpetual easement takes the cell site out of the future of most heirs alive today, a fixed-year easement will allow the cell site easement area to revert to either the original Grantors or their heirs. Thus, depending on estate planning or future property development, the fixed-term offers the ideal term with a near term high return on investment.
The Assignment of Lease – A few of the lease buyout companies are willing to forego the easement and assume what amounts to a partial assignment of lease (primarily the right to receive rental revenue). The assignment of lease is also for a certain term. With the assignment, the property owner (landlord) agrees to assign certain landlord rights under the lease with the carrier to the lease buyout company. This product can be useful in certain circumstances where an easement area is not easily identified or a property owner does not want to place an easement on the title record of the property.
Why should I care about the difference between an easement and an assignment?
Many property owners seek our counsel on whether to pursue an easement or an assignment.
First, not all lease buyout companies will agree to an assignment. So if you have accepted an offer from a company that only offers an easement product, then an assignment of lease(s) will not be an option.
Second, you should factor your taxable rate into the consideration of whether to pursue an easement or an assignment (see previous tax discussion).
Third, if you are a real property investor and you want to pursue a 1031 exchange with the proceeds from the sale of a real property interest, then you will likely elect to pursue selling an easement underlying the cell site(s) on your property. The assignment and easement documents are structured similarly and both are recorded on the title record to the property; however, an easement creates an interest in the underlying real property, whereas an assignment of rents is only secured by the rents from the lease.
Most lease buyout companies pursue an easement because it is an actual interest in the real property. An assignment of rents is only an interest in the lease. While both documents are legally binding, an easement interest is perceived as easier to enforce with both the property owner and the wireless carrier – as there is statutory and well-settled case law surrounding the grantee’s rights and the enforcement of an easement interest.
Which form of document used for the sale depends largely on individual factors and the projected use of your property. We work with our clients to carefully consider their near-term needs, tax considerations, and the best solution for their circumstances. Each and every lease buyout transaction has its own nuances, which can be driven by the specific use of the property, the land owner’s desires, or both. It is important to carefully weigh and balance the information we provide as it will help you decide how best to proceed. In any event, be sure to speak to your attorney before you sign anything from any of the lease buyout companies, even if you are told that it is not legally binding.