Make Sure Rooftop Cell Tower Contract Is Airtight

Make Sure Rooftop Cell Tower Contract Is Airtight



By Andrea Brescia

Cell transmittal towers are popping up all over the country to serve the 91 percent of American adults who now own mobile phones. If your community is in a location where customers have reported a lot of dropped calls, a cell carrier could be interested in leasing the rooftop of your condominium or other community building. Service providers that are eager to place towers in strategically needed, high-traffic areas can be a good source of income for associations with available rooftops.

But what do you need to know before giving the go-ahead for a cell phone tower to be installed on association property? Who assumes the liability of the structure? Will homeowners have fears about living near a transmission hub? How much income can you expect to make each month?

Here are some tips to help you negotiate a fair deal, generate income, and protect your association while ensuring that a cell tower installation gets a welcome reception in your community.

Location, Location, Location

Cell phone providers usually approach an association with an offer to lease space for their transmission tower, rather than the other way around. According to Steve Karzella, president and CEO of AirWave Management in Lewiston, Idaho, cell carriers scour an area where service is needed, such as an area where gaps in service have been reported. Today, because of the rapid growth associated with smartphones, there is a huge demand for additional data capacity and coverage. If a cell provider approaches your association, this could be a steady income stream for years to come.

Check Governing Docs, State Law

Before you do anything, check your governing documents including any architectural provisions. Is the board authorized to lease common space? Will you need to bring this to a vote?

Look for language like this in your governing documents regarding leasing common areas, says Florida attorney J. Robert Caves, III: “The board has the authority to make material alterations to the common elements up to [a specified dollar amount per year].” Your governing documents may also state exceptions, such as a cell tower provision.

If your governing documents don’t specify the board’s authority, check your state laws to determine the authority of the board to make changes to the common elements. In Hawaii, for example, the big issue used to be that the HOA had to get owner approval for a rooftop cell tower installation, says Hawaii attorney Richard Ekimoto. The statute has since been amended to allow boards to lease out unused common space, he says.

Ask Carrier for Site Plan

For most condominium associations, the roof will be the likely and practical location, as well as the choice of the service provider. Antennas must be high enough, with clear sight lines, so that they can transmit signals over a wide area.

Before you even get into negotiations or sign a term sheet or letter of intent, it’s important to see exactly what the carrier is proposing on your property. Ask to see site plans and drawings of what the installation will look like on your rooftop.

If the carrier balks, remember one thing: Cell providers typically approach HOAs as a last option, perceiving that it might be a challenge or take considerable time to get board and/or member approval. Yet according to Karzella, if the carrier has identified a service gap in your geographic location and it’s contacted you, it has probably exhausted other avenues. He advises using this as a leverage point, to see exactly what you are getting, and to avoid signing a standard cell tower contract.

“Any association that is presented with an offer should review the contract with their attorney,” says Caves. “The contracts are drafted by the cell provider’s attorney for the benefit of the cell provider.”

How to Negotiate a Fair Deal

Like any contract, a cell tower lease agreement should be mutually beneficial. The biggest areas to consider are the term of the contract (how long will this tower be on your rooftop?), the rate (what income can you expect to generate?), and the liability (who is responsible for insuring the association’s property and the antenna?).

Signal your terms. Typically, a contract will have a term of five years, with multiple options for additional five-year terms, with the possibility that the relationship will last around 25 years. Since the provider is making a capital investment in the purchase and installation of the equipment, it’s in the provider’s interest to sign long-term contracts. However, if market conditions change, a provision to cancel your agreement could suddenly leave your association without the income you had come to expect.

According to Ekimoto, a current trend is for cell phone companies to add provisions that allow them to cancel the contract at any time if it no longer fits their needs—while the association is locked in for the term. While this is standard language in most cell provider contracts, knowing that your contract may be terminated earlier than you expected will help you prepare. Karzella says you can protect your association from sudden surprise by insisting that you get prior notification before termination. Typically, you can negotiate at least a six-month termination notice, and this should be built into any contract you sign.

Know your market to estimate the value of your location. When it comes to income generated, cell tower lease agreements vary greatly by market. It’s all about supply and demand. Knowing your market might factor into the value of your location and help you negotiate a competitive price.

Carriers pay a flat leasing fee to the association, although the carrier generates revenue for every transaction that bounces off the tower. A tower in a high-traffic area will generate a lot of revenue for the carrier, and its leasing value will increase. For example, a comparison of the lease income on several different cell towers ranged from $1,000-$3,000 per month in the same metropolitan market. While it’s difficult to estimate the cellular traffic—service providers keep this information very close to the vest—hiring an independent wireless consultant might be something to consider prior to signing the contract or renewing for another long term.

The association can make additional money if it allows the cell provider to sublet the site—and requires the provider to share its sublet profits. Standard rooftop lease agreements usually state that the cell provider “shall not assign or sublet this Lease or the Premises without the Landlord’s written consent, which may not be unreasonably withheld, delayed, or conditioned.” Many cell providers will try to co-locate with other cell providers at one site and reap huge profits that your association won’t participate in—unless the agreement requires the providers to pay you a portion of those profits.

Inserting a profit-sharing formula into this provision could be an answer to this problem, but there are other issues to think of as well: Will the new subtenant install equipment that will interfere with members’ service, damage the building, be an eyesore, or block site lines? These are some of the matters to consider when negotiating a provider’s standard assignment and sublet provision.

Protect your property. One of the biggest concerns is protecting your roof. You’ll want to ensure that a qualified company that assumes all responsibility and liability for the installation and indemnifies the association installs the tower antenna and equipment.

Another thing to consider: the roof warranty. Does installing equipment on the roof invalidate your warranty? What happens when general maintenance is needed on the roof? Most associations are able to work with the roofing company to make sure that the warranty isn’t invalidated by the installation, tower, and equipment by providing access to inspect the work, meet the installer, etc.

In addition, eventually your roof will need maintenance. Make sure you include a provision for routine roof maintenance in the contract. Cell providers might either install their equipment on platforms that can be maneuvered around or install temporary antennas during maintenance. In either case, the provider will want to ensure that service isn’t interrupted to its customer base.

Look for any provision in the contract that requires the association to indemnify the cell provider in the event of damage and strike this out. You’ll want to be fully indemnified by the provider if something unexpected were to damage the cell tower or property, like a hurricane.

Also address security concerns. Standard rooftop leases agreements give the cell provider 24/7 access to its equipment. Although the provider may have a legitimate interest in having round-the-clock access to its equipment, there are valid security reasons why you would want to control such access.

Require the cell provider to give you 24 hours’ advance notice of its need to access the roof. In emergencies, the provider should call the association manager to give notice of its intent to enter the community. A representative of the association should have the right in all cases to accompany the provider during any such access.

Furthermore, if access to the site is requested outside normal business hours, the provider should agree to reimburse the association for the additional cost of employee salaries, including any overtime pay, that the association pays to any employee who supervises the provider’s access to the site.

Practical Pointer: Ask your association’s attorney to add contract language that contains some manner to resolve potential disputes—such as arbitration or mediation. Most providers are willing to consider associations’ concerns about dispute resolution, says Caves.

Listen to Members’ Concerns

Regardless of the financial incentives, homeowners sometimes have initial concerns or even fears over the installation of a cell tower close to their homes. A common worry is that the cell tower will have negative effects on health.

According to the American Cancer Society, there is little evidence to suggest that living or working near a cell phone tower increases the risk of cancer or other illness. The level of radiofrequency (RF) waves is relatively low—and in urban areas often mirrors the levels of RF produced by radio and television broadcast stations.

“In Florida, an owner’s complaint (over possible negative side effects)—absent of compelling evidence that he’s experiencing some injury (health or financial)—would not inhibit the installation,” says Cave. “I’m not aware of anyone using that argument to successfully remove or bar the installation of an antenna.”

Checklist of Considerations When Negotiating Cell Tower Contract

[]   Make sure you’re comfortable with the length of time the contract covers.

[]   Include a provision that requires the cell provider to indemnify the association in the event the tower or property is damaged by a storm, earthquake, etc.

[]   Use only a reputable installer that indemnifies your association.

[]   Work with the roof company to make sure that your roof warranty isn’t invalidated by the installation of the tower and equipment.

[]   Include language in the contract that gives you at least a six-month notice of termination from the cell provider should it decide to cancel the contract.

[]   Make sure that the contract has some manner to resolve disputes and address concerns during the life of the contract.

 

Andrea Brescia is a New Jersey-based editor who writes for housing-related publications and organizations.

Insider Sources

J. Robert Caves, III, Esq.: Southwest Florida Offices of Becker & Poliakoff, P.A.; JCaves@bplegal.com.

Richard Ekimoto, Esq.: Ekimoto & Morris, LLLC, Honolulu, HI; rekimoto@hawaiicondolaw.com.

Steve Kazella: President and CEO of AirWave Management, Lewiston, ID; Steve@AirwaveManagement.com.

Clifford J. Treese, Esq.: Association Information Services, Inc., Pleasanton, CA; Clifford.Treese@gmail.com.

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