Following on from part one and part two of my article titled: How is telecommunications leasing different to any other type of commercial leasing? I will conclude the series by highlighting some of the interesting variations to usual commercial leasing positions.
Often a carrier might seek to limit what a landlord can erect on its land. Landlords often take offence to being told what they can and cannot do on their own land.
Remember the spider web analogy that I used in part one? This is where it becomes relevant. Each strand of web (transmission signal) from one facility must have an uninterrupted line of sight to the next facility to enable the signal to be cast out and overlap with the next facility it transmits to.
It has been explained to me by those with the knowledge of how this type of technology functions that ideally the signal from one facility overlaps on the edge of the next facility and the call or data is handed over to the next facility without too much cross over. This cuts down on interference and poor signal. So if a landlord erects a structure on its land tall enough to cut through this “web”, the transmission signal will be blocked and the network compromised due to a break in the “webbing”.
Carriers are not seeking to completely control what occurs on the land. They are simply seeking to manage anything that would compromise their network, such as a multi-story building being constructed right next to their tower or rooftop panel antennae.
The spider web continues to spin as we discuss the fact that carriers will often want to have the ability to terminate their lease at any time, however do not want to afford the landlord the same right.
I can feel the eyebrows raising at this point and the question of what is she going to come up with to justify this? This surely is not fair, both parties should have a mutual right to terminate…right?
The first thing to understand is the cost of installing and maintaining a telecommunications facility. The cost of just the construction of a base station compound (monopole with equipment cabin) facility could be anywhere between $100,000 and $500,000. Construction of a rooftop facility could be anywhere between $50,000 and $200,000. The prices vary depending on the amount of materials and equipment required for the particular facility, the complexity of the facility build and accessibility to the location.
This is clearly a significant investment and due to the amount of money being invested, the carrier seeks the longest period of secure tenure as possible. It is not financially viable to expend that sort of money, then have a casual change of heart and decide to move the facility 100 m down the street because the view is better. There are a lot of technical points that are considered prior to installing a facility. The design and consideration in the facility’s location is intended to give the carrier security in its network in that area for as long as possible.
This is where the carrier wants to ensure that the landlord cannot just terminate the lease should they change their mind about having them on their land / building during the term. As long as the carrier does the right thing by the landlord and does not breach the lease, the carrier wants to know that the facility, being one of the many thousands of working parts within their network, is secure. At the very least, for the duration of the lease.
On the flipside, the carrier often wants the ability to terminate the lease at any time. As mentioned earlier, it is unlikely for termination by a carrier to occur due to a change of heart. This is clear from the costs involved in establishing the facility. The most likely reason a carrier would want to terminate its lease during the term will be due to the facility no longer servicing the network as it should.
This could be caused by many things. The carrier cannot control what land owners do between the points at which their “web” transmission signals come together and meet.
If a land owner between the two transmission points erects a multi-story building or some other structure which obscures the line of sight required to ensure continuous transmission, the facility sitting on the landlord’s land may become a pointless piece of equipment. If it cannot be utilised in another way (such as re-aligning it to transmit to another site close by), then it is no longer viable to the carrier’s business. It needs to be removed and possibly a new location identified to get the network functioning again.
The cost of erecting these facilities can be extremely high. Replacing existing facilities is not something a carrier wants to do often, so the likelihood of a carrier terminating a lease without a valid reason is extremely minimal.
Location! Location! Relocation!
Reconfiguration and demolition clauses are often sought by a landlord when negotiating a lease with a carrier.
With telecommunications lease terms often stretching out to 20 years or more, the owner of a building wants to know that it will be able to deal with its building as it sees fit. Especially in circumstances when you are dealing with a shopping centre, the owner will want to know that it has the ability to update the centre and expand or demolish and rebuild if desirable.
The carriers understand this flexibility being requested by the landlord. The carrier will however often request that the landlord be unable to exercise such a right for a set period of time. This again comes down to the cost of installing telecommunications facilities and the security of a functioning network.
A carrier does not want to outlay anywhere between $50,000 - $500,000+ installing a facility only for the landlord to turn around six to 12 months into a 20-year term requesting that the carrier relocate or completely remove their facility from the land / building. The waste of money and interruption to their network functioning securely would be a big hit to the carrier in such a situation.
To minimise the possibility of being in such a situation while still understanding the business requirements of the landlord, a carrier may request that for at least a 10-year period within a 20 year term, the landlord be unable to exercise such a provision.
Such a restriction should not cause too many concerns for a building owner as they will usually have plans for any redevelopment or demolition forecasted well in advance.
Telecommunications carriers manage a portfolio of assets that, whether we like it or not, we rely upon significantly in today’s day and age. A large population of humans and businesses rely on the uninterrupted functioning of a network in the areas surrounding a telecommunications facility.
Land and building owners have every right to ensure that they protect their rights and ensure that they are getting compensated appropriately for the use of their land for these important pieces of infrastructure. However, they and their lawyers should also keep in mind that there is more to what motivates carriers than what may appear on the surface of a telecommunications lease. Yes, a carrier runs a business and wants to strike a financially viable deal, however there are so many factors that have to be considered due to the technology being used, that what may seem a ridiculous requirement or obligation within a retail lease, should be seen as quite reasonable in a telecommunications lease.
Mobile phone connectivity is 100% necessary in today’s day in age. We rely on it personally, professionally and as a necessity to live in the world we have grown accustomed to today. With the implementation of the Internet of Things and 5G technology on the horizon, our reliance on it is only going to become greater.
I hope that if you do come in contact with a carrier at this level, possibly as a landlord or the lawyer of a landlord seeking to enter into a lease for a telecommunications facility, that my articles have assisted you to be more prepared for such an interaction.