Negotiating the Mobile Site Lease Agreement / HOME

Negotiating the Mobile Site Lease Agreement

The Bargaining Position of the Landowner

Despite what you may have heard from other landowners or solicitors, the balance of power in mobile site lease negotiations very much depends on the unique characteristics of the land involved and, in turn, the land's perceived value to the telecommunications carrier. For example, some factors to consider are: In the case of a building, how tall is the building relative to the adjacent building or others in the neighbourhood? Are there other similar buildings or properties nearby in terms of height and views that are available? Is there sufficient space on the property or building rooftop to accommodate the carrier's installation needs today and/or in the future? What kind of network traffic is there currently, and what are the projections for future network traffic in and around the property? These are just some of the factors that will influence the bargaining position of the parties and, ultimately, the landowner's ability to maximise rental payments as well as reduce obligations and liabilities during the mobile site lease term.

Mobile Site Lease Terms

  1. Rent - The amount of rent paid for a mobile site will be based on various factors, most importantly: 1) The amount of space the carrier needs to install its equipment, and 2) The demand for a mobile site on the property involved or the surrounding area. The carrier typically requires approximately 25-30 square metres of property to construct a mobile tower (a little less space to construct a site on a building rooftop). Unlike other commercial leases, however, the amount of rent for a mobile site is not necessarily based on a formula of price per square metre. Rather, the demand for the mobile site and the coverage it provides to the surrounding area will dictate how much it is worth and the rent the carrier is willing to pay for a mobile site lease.
  2. Co-Location Fees and Sublease - In addition to the negotiated monthly rent, the landowner should also be mindful of the potential to collect "co-location" fees from the carrier. A "co-location" fee is a percentage of the rent paid to the carrier, typically by another carrier, in the event that the original carrier subleases a portion of its leased property. As a general rule, most carriers refuse to share revenue earned from co-locating other carriers, however, that does not mean that they won't. A carrier's willingness to share in co-location fees and the percentage of such fees offered to the landowner is dependent in large part on the importance the carrier has placed on the property at question or, alternatively, the gap in coverage that will be occupied by the site in question. The landowner should be cautious in demanding co-location fees in the mobile site lease because in situations where the carrier has additional options, they will choose another location for the mobile site.
  3. Lease Term and Commencement- The carrier typically requests an initial term (five years) with successive options for renewal terms (three, five-year renewal terms) at its sole discretion. Because the cost of installing equipment and the necessary improvements at a mobile site dictate that the carrier must occupy the mobile site long enough to recover a reasonable amount of value, a carrier will never grant the Landowner a broad right to terminate at the end of a term or renewal term, or to otherwise bar the carrier's right to renew. If the mobile site potentially provides significant value to the carrier, however, the landowner may be able to negotiate a longer or shorter initial term, fewer renewal terms, or the right to terminate or relocate the mobile site lease upon the occurrence of a specific event, i.e., the sale or redevelopment of the building. Finally, the value of the mobile site may also dictate the amount of the increases or "escalations" in the rent every year or renewal period.
  4. The “Permitted Use” Paragraph - "Use" paragraphs come in two forms – those that are simply descriptive and those that impose limits on the nature or form of activities on the property. Depending on the significance the carrier attaches to the property in question, a landowner may be able to negotiate a narrowly defined use provision to limit the use solely to the construction, maintenance and operation of the mobile site. This will serve to provide the Landlord not only with some assurances over the use of his property by the carrier and its sub lessees, but also provide him with leverage should the carrier seek to renegotiate to expand its use or technology in the future.
  5. Access - The carrier typically requests the ability to repair or maintain its equipment 24 hours a day, 7 days a week. Although the carrier needs this flexibility to provide uninterrupted service to its customers, it raises concerns to the landowner because it may result in potential interruption of the property's other businesses as well as risk the overall security of the property. If the landowner knows that his property is extremely useful to the carrier's network, however, he may be able to limit the situations and the times of the day in which the carrier may have access and, consequently, reduce the potential for interruption to the building as well as the landowner's exposure to further liability.
  6. Interference - This is one of the most important provisions of the mobile site lease from the carrier's perspective. If the carrier is unable to operate its facilities because of any interference to its signal or equipment, it must be able to remedy the situation in a timely manner. In such a situation, the carrier will always seek to avoid bearing the responsibility for interference by a third party. This is often a highly negotiable paragraph, and if the landowner believes that he has leverage in the negotiation, he may be able to negotiate away any responsibility or liability to remedy the interference, subject to the cause of the interference.
  7. Termination - It is common for a carrier to seek an early termination clause in a mobile site lease. The carrier's explanation is that it must be able to terminate if a site becomes unusable because of interference problems, or it loses its license or permit to operate, or, more importantly, it finds the site unsuitable due to changes in technology. A landowner who understands the value of its property relative to other available properties may be successful in eliminating some of these reasons altogether or at least increasing the notice period for termination under these circumstances. In some instances, the carrier may agree to some form of termination fees in exchange for the right to terminate the lease before it reaches term. Many landowners who have had their Hutchison “Orange” leases terminated due to the CDMA network shutdown generally received nothing after the mobile site lease is terminated. Maybe this could have been avoided if the mobile site lease had been negotiated properly. Similar circumstances may also soon arise with the Vodafone and Hutchison 3 merger.
  8. Assignment/Sublease - The issue of the carrier's right to assign or sublease is another critical provision in any mobile site lease. The carrier wants flexibility in assigning or subletting the Agreement, specifically the ability to assign without having to obtain the landowner's consent. This is important to the carrier for many reasons including the ability to transfer the Agreement freely in the event of a merger or acquisition involving the carrier. Finally, the carrier may want to sublease a portion of the leased premises to other wireless communication companies. Because of this, the carrier will generally not accept any restrictions in the assignment or sublet provision. Notwithstanding the foregoing, if there is a strong demand for the property at issue, the landowner may be able to retain some control over an assignment or sublet by requiring consent in specific situations or absent consent, negotiating acceptable minimum standards or fees with a prospective assignee or subtenant.

The provisions described above emphasise the point that the successful negotiation of a mobile site lease comes from truly understanding the perceived value of the property to the carrier. Once a landowner understands the perceived value of the property, he may begin to achieve additional benefits in the negotiation through the carrier's willingness to accept changes to the Agreement, thereby maximising the return on the mobile site lease while protecting his interest in the property.

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