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Cell Tower Lease Modifications and Expansions

A “cell tower lease expansion” is when a tower owner wants to expand the current land area that they lease on your property while a “cell tower modification” is a request for the tower owner or wireless carrier to add new equipment without necessarily expanding their lease area.  While expansions almost always include the ability to negotiate higher rents, modifications don’t always.   Some modifications are allowed under the lease.  With 5G on the horizon, we have observed more modifications in 2018 and 2019 than we have in years.

 

Whether a modification or expansion, the landowner or building owner typically first receives a letter from the cell site tenant asking to make “improvements” to their site.  The emails or letters almost always suggest that the improvements are beneficial and will increase coverage or capacity.  They use careful language such as “the improvements will be done in the lease area” or “these improvements are contemplated by the lease”.  Pay specific attention to whether the request says that you are obligated or not under the lease to approve the request for improvements.
T-Mobile Equipment Modification Drawings
Recent construction drawings detailing proposed equipment changes on a T-Mobile cell tower site

Since 2004, Steel in the Air has serviced over 3,500 landowners nationwide by helping negotiate favorable leases with wireless carriers, tower companies, and lease buyout companies. We know the industry inside out and can assist you with making informed decisions based on comprehensive knowledge of all the factors relating to the terms of your lease, including its present and future value.  We have helped many landowners and building owners receive additional rent when the carrier was only asking for consent initially and not offering anything.  How can you tell whether you should be receiving additional rent?  Read on below on expansions and modifications.

 

Here’s what we can do for you:

  • Review the Lease We will evaluate the terms and language of your current lease and any proposed amendments to determine what your rights and obligations are (including the right to compensation), and explain the real-world effect that any proposed changes will have on you.
  • Audit the Cell Site We will review the cell site based on “uniqueness” metrics to determine the feasibility and costs associated with the proposed cell site expansions and modifications. This analysis will include an investigation of zoning regulations, tenants and usage, equipment allowances and expected profit flow to the Lessor.
  • Review their Proposed Modifications or Expansion Request We have reviewed thousands of construction drawings for wireless equipment for our clients. We have completed hundreds of expansion related assessments for our clients and a similar number of assessments on equipment modification requests. We know what to look for, what the technology is, what they are doing, and what your lease allows.
  • Provide Recommendations Using comparable lease rate data for similar expansions or modification requests, we will advise on the fair market value of those changes. We’ll also let you know what fees, if any, should be charged for expanding the footprint of your lease.

Equipment Modification Lease Negotiations

Many of our clients have received requests from their tenants (most notably AT&T, Verizon, T-Mobile and Sprint) regarding the installation of additional equipment onto the leased cell site. Often, these letters simply seek to inform the landlord that equipment installations, modifications or replacements will be made. The letters are carefully drafted so that you are led to believe that the modifications are allowed under the lease. These consent letters rarely include construction drawings or actual information that would be useful for the landowner to know whether the modifications are significant. Many times these modifications are not allowed under each lease agreement. In fact, unless specifically spelled out that equipment modifications, replacements, and installations may be made without compensation, you are probably entitled to some compensation. Let us help inform you of your rights to ensure that no money is being left on the table.

We don't want you to leave money on the table when you negotiate an amendment for an equipment modification. But you must also be careful not to ask for more than is reasonable for the lease area expansion because by doing so, you may cause the carrier to explore other locations or simply choose to not upgrade the particular site. Determining the appropriate rent for modification is not an easy task, but the experts at Steel in the Air have the advantage of having assisted hundreds of other landowners with similar evaluations.

Remember too, that you DO NOT need to agree to an extension of the lease term in order to receive compensation for the modification. While the carrier may ask for the extension, our clients rarely give them with the modification.

If a wireless carrier or cell tower company has contacted you about modifying their equipment, ask them for construction drawings that show what they are doing and then contact us today. We will be happy to discuss the offer and indicate whether we can help with your negotiations. We won't advise you to engage us unless we believe there is a strong probability that we can better your situation.

Why do wireless carriers and cell tower companies seek cell site lease expansions?

Many landowners who are currently engaged in cell tower leases with wireless carriers and tower companies are being asked to lease additional ground space or an area beyond what was originally negotiated in the cell site agreement. There are a number of reasons why the carriers or tower companies are looking to expand the lease footprint.

  1. Collocation. One major reason is to allow for cell tower collocation (sharing the tower with additional tenants). When the cell site agreement was initially agreed to, a certain area of ground space was allotted to be used for the purpose of building the cell tower, however since then it has become common (and lucrative) for wireless carriers and tower companies to make use of existing towers rather than build new ones.
  2. Mergers and Acquisitions. Another reason landowners (the “Lessee”) might be contacted with requests to expand upon existing leases is due to downsizing (and subsequent consolidation of equipment and resources) brought on by mergers and acquisitions, as seen with AT&T and Cingular or T-Mobile and MetroPCS. In this case, lease expansions are also profitable to the Lessor, allowing operating costs that are associated with maintaining duplicative sites to be cut. So while one site might be terminated, another will be expanded to accommodate additional equipment.
  3. New Technology. In other cases, wireless carriers intend to add new services or technologies to their existing network infrastructure. For instance, all four wireless carriers are starting to add 5G antennas and equipment to their sites while revising their 4G (LTE) equipment at the same time. This additional service often requires additional cabinets and/or additional antennas.

Some tower companies are attempting to “purchase” additional ground space when they try to extend the lease area or purchase the remainder of the lease via a cell site lease buyout. By tying the additional lease area to the lump sum purchase offer for the cell site lease, the carriers can often get the landowner to give up additional space before having the opportunity to discover the value of additional revenue they might otherwise receive for expansion.

As the landowner, you should ask yourself a number of questions before granting additional lease area, including the following:

  1. What's the purpose of the additional lease area?
  2. How much extra lease area is being requested?
  3. How much lease area is actually needed for the proposed use?
  4. How critical is the expanded footprint for the carriers' network infrastructure goals?
  5. Can the carrier modify or reconfigure its equipment instead of expanding the lease footprint?
  6. What will be the impact to me from the use of the additional lease area?
  7. What are other landowners receiving for expansion of their lease areas?
  8. Does the expansion provide me an opportunity to renegotiate a poor lease?
  9. Will the expanded footprint be usable by other wireless carriers (which could potentially reduce your future income)?

Steel in the Air experts can help you answer all these questions and more. Visit our Ask Us Anything forum for frequently asked questions and answers.

Insider Tips

  1. When wireless carriers install their antennas onto a cell site, they may or may not do so in consideration of future tenants. The current industry trend is for multiple wireless carriers to share cell sites (also known as collocation). Future collocation of additional tenants could increase your rental payments, so it's a good idea to understand how this might play out before any equipment is installed.

  2. Carriers nationwide are racing to deploy 5G. If you are party to a cell site lease and the Lessee wants to update its network infrastructure for 5G, chances are that you are eligible for some compensation.

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