This is a continuation of a previous post explaining common components of a cell tower lease. If you have not already done so, we advise returning to the earlier post before reading this explanation on lease buyouts.
Negotiating cell tower contracts is all we do!
Land owners are often approached by a telecommunications agent looking to buyout their cell tower lease. This involves selling the lease on the tower separate from the parcel. They are typically purchased by investors as easements or sometimes lease assignments. Depending on the original contract, the power in these transactions comes down to a number of factors. It could be controlled by the land owner or a separate entity with control of the leases. A number of questions must be answered regarding the viability of a cell tower lease buyout.
- Who is the landowner? – Landowners are generally the first leaseholder, although the actual lease has likely changed hands several times over the life of the lease.Ultimately, the land owner holds the right to the lease.
- Is the parcel for sale? – Cell phone companies do not own the land when they purchase a lease. Landowners should not part with the land when it is avoidable. New cell phone companies can purchase an existing lease from the leaseholder, but control of the parcel is generally not part of the contract.
- Who will likely purchase the lease? – Leaseholders can transfer a lease to anyone at will, but the landowner will own the leasing rights. Each time the lease changes hands, the land owner should be paid for leasing rights and rights to the parcel.
- What is the duration of a typical Cell Tower Lease? – Cell towers are commonly leased for up to 5 years and are renewable at the end of the original duration. Depending on the contract, they can easily have much shorter duration, down to 1 year. Landowners are within their rights to change the prices each time the lease contract expires.
The bottom line is that landowners control how the lease is transferred. Parcels should not be sold when avoidable. Your role as a landowner is the sale of the rights to control the actual tower on your property.
Negotiating cell tower contracts and Buyouts of cell tower leases have tax consequences that should be considered when a landowner is considering transfer of a lease.