Practice Tip-A Costly Error Many Landlords Make When Leasing To A Cellular Carrier-Why the Restoration Clause Is Essential in a Cell Site Lease

Legal Alert

July 11, 2022

I recently received a phone call from a man who lived on twenty-four acres of raw land in rural Michigan. He explained to me that he had leased a small portion of this property to a large national cellular carrier about a decade earlier. The cellular carrier then built a 200-foot-tall free-standing lattice tower on which it placed transmitting and receiving equipment. However, the location did not prove to be as profitable as the cellular carrier anticipated, so it abandoned the site prior to the end of the lease term. The gentleman explained that he and his wife were of modest means and had counted on that lease income to support them in their retirement.

To make matters worse, the man also told me that the cellular company abandoned the tower, all of the equipment attached to the tower and all wires and cables associated with the installation. The gentleman and his wife could not afford to take down all of this equipment and haul it off of their property, so the “improvements” still remained on his property over a decade!

This scenario illustrates a common point missed by many landlords–the requirement that the tenant restore the property to its original condition at the end of the lease term. Unlike other commercial leases, a cellular carrier’s “standard lease form” is generally silent on this topic.

A notable exception came up in my practice recently when a cellular carrier asked my client to use its “standard lease amendment form.” The “standard lease amendment form” contains a provision which states, in part, as follows:

“Tenant, in its sole discretion, may remove the Communications Facility or any portion…at anytime during the Term…without notice to Landlord and without consent. Tenant will not be responsible for the placement of any trees, shrubs or other vegetation, nor will Tenant be required to remove from the Premises…any foundations or underground utilities. Tenant, may, in its sole discretion, transfer any improvements…to the Premises to Landlord at any time during the Term of the Agreement without notice to the Landlord and without the Landlord’s consent.”

This “new” lease amendment language is anything but new. It simply codifies what has been standard operating procedure for cellular carriers over many decades. Given that technology is constantly changing in the telecommunications industry, the equipment on a landlord’s property may have little to no value at the expiration or earlier termination of its lease. The costs required to remove these improvements and restore the lease premises are then passed on to the landlord and these costs are not minimal

So what prompted the man in rural Michigan to call me a couple of months ago?

Over time, people living and working in Chicago, only a couple of hours away, discovered this rural part of Michigan and it has become a popular weekend get-away. It became so popular that the gentleman recently received a knock on his door from two well-dressed men with clipboards from a different large cellular carrier. These men specifically asked the landowner if he was interested in leasing a portion of his property so that they could construct a lattice tower on which they would place their transmitting and receiving equipment.

In this particular situation, the owner of the property landed on their feet. The best time to ensure that the property owner is protected is when the cell tower lease is first negotiated or the parties are entering into an amendment of an existing lease.

Have you been approached by a cellular carrier to lease a portion of your property?