{"id":1729,"date":"2016-07-18T13:40:02","date_gmt":"2016-07-18T13:40:02","guid":{"rendered":"https:\/\/www.sherin.com\/real-estate\/?p=1729"},"modified":"2021-04-22T18:33:07","modified_gmt":"2021-04-22T18:33:07","slug":"telecommunication-lease-the-battle-over-subleasing-rights","status":"publish","type":"post","link":"https:\/\/www.sherin.com\/real-estate\/2016\/07\/18\/telecommunication-lease-the-battle-over-subleasing-rights\/","title":{"rendered":"Telecommunication Lease: The Battle Over Subleasing Rights"},"content":{"rendered":"

\"\"Telecommunication (\u201ctelecom\u201d) leases can be a unique animal due to the nature of the tenant\u2019s use and\u00a0business model. In negotiating these leases, the parties can run into difficulties negotiating the subleasing rights. Landlords are typically reluctant to agree to a tenant\u2019s ability to freely assign or transfer. In the context of telecom leases, however, it may be worthwhile to consider why these rights, particularly subleasing, are so valuable to tenants and may even be beneficial to landlords.<\/p>\n

The Business Model<\/strong><\/p>\n

Several tower companies act as operators and managers of the telecom infrastructure, in other words the \u201ccell tower\u201d, and are often not wireless carriers themselves. Therefore, for these tenants the ability to freely sublease becomes integral to the success of their business, the value of the tower, and the landlord\u2019s ability to reap the benefits. The reason being is that carriers, both nationally recognized like Verizon and AT&T and smaller companies such as a local radio station, seek to sublease space on the tower for which to locate their telecom, wireless or broadcast equipment for the operation of their business. Unlike the standard sublease, the original tenant typically remains an active party, facilitating the operation and management of the tower as permitted under the lease. In this model, the carrier pays rent to the tenant under the sublease of the lease, and the landlord typically receives a base rent and often times a revenue share of the carrier rent or flat fee per carrier as additional rent from the tenant.<\/p>\n

The Valuation of Tower Sites<\/strong><\/p>\n

The most desirable towers, aside from location, are those on which carriers can most efficiently install their equipment and become operable. Carriers don\u2019t want to be held up while the tenant obtains written consent for the sublease from the landlord; when they want to locate, they want to locate immediately.\u00a0 Time is money! Carriers don\u2019t want to worry if consent cannot be obtained for weeks or more because it got lost in the mail or the landlord is on vacation. Instead, the carrier may look for a different tower to locate on altogether eliminating both the tenant\u2019s and landlord\u2019s ability to benefit. Therefore, these desirable towers often become the most valuable since they sublease to multiple carriers. The benefit to the landlord is sustained lease term and base rent, since most telecom leases allow the tenant a unilateral termination right of some sort, and in addition, larger amount of revenue share payments or flat rate payments.<\/p>\n

From a landlord\u2019s perspective, however, landlords want to give careful consideration to the effect of such expansion rights, particularly on roof top towers as this expansion may undercut your ability to further lease other roof top space to other telecom users. Roof top agreements have become beneficial sources of revenue for building owners and a landlord will want to ensure that its roof top agreements provide the ability to manage and preserve these revenue rights, and of course roof top space for building\u2019s tenants and occupants.<\/p>\n

Subleasing Language<\/strong><\/p>\n

Does this mean a landlord should agree to free subleasing without conditions? Not necessarily. What it means is landlords should consider the impact that the ease of doing business on their tower will have on its attractiveness to carriers. Instead of requiring \u201cprior written consent\u201d, as an alternative, a landlord could seek \u201cprior notice\u201d or \u201cnotice\u201d or even a \u201cdeemed consent\u201d concept after \u201cflag\u201d notice and a brief period of time. In this alternative, the carriers are able to locate easily and quickly, yet the landlord is still aware of the additional carrier on the tower. Moreover, the landlord\u2019s awareness of how many carriers are on the tower can be useful when it comes time to renegotiate the lease; with an understanding of the value of the tower based on the amount of subtenants present, the landlord may be able to negotiate a higher rent. With easier subleasing rights, it is important that the lease contain adequate installation and alteration provisions (along with insurance and indemnity provisions) to protect the building and its infrastructure and other tenants and occupants. Moreover, with these more liberal subleasing rights, revenue sharing should be investigated.<\/p>\n

Consideration and Potential Benefits for Landlords<\/strong><\/p>\n

Landlord considerations to subleasing:<\/p>\n