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Rooftop Lease Agreements: What Telephone Companies Don’t Want You To Know

I remember looking at my first rooftop lease with some trepidation. I knew that there were probably a host of issues that were different from a typical office or retail lease. I was also concerned that many of these “special” issues [i.e. issues that do not usually arise in office or retail leasing transactions] could pose problems for a landlord who is contemplating the idea of leasing a portion of one of its buildings to a provider of cell phone service for the installation of radio antennas. I was worried that I would not be able to determine which issues were worthy of note for this particular kind of specialized transaction.

This commentary focuses on some of the common topics that an attorney representing a landlord should consider when reviewing a rooftop lease. Although many of the suggested responses mentioned below are not the only answer with respect to the selected issues, the failure to consider these issues could have an adverse impact on your client’s interests. As would be the case with any “standard agreement,” if the other side is offering such a lease, that document is going to be very one-sided. Consequently, an attorney should be particularly vigilant in reviewing such contracts.

This article is not intended to be an exhaustive discussion on everything that a landlord should look at when reviewing a rooftop agreement. It only offers a review of some of the basic topics that a practitioner should highlight when analyzing a typical agreement sent by a cell phone provider.

What follows is a list of selected clauses from a “Standard Building and Rooftop Agreement” and suggested landlord responses with respect to each provision. An attorney’s likelihood of successfully prevailing on any of these issues—its bargaining power—will depend on many factors such as: (a) whether the lease is an existing lease or a new one; (b) whether it is a tenants’ or owners’ market; and (c) the negotiating experience and level of preparation of each of the parties involved in the transaction.

Location of Antennas and Installation of Equipment


Boilerplate
LANDLORD is the owner of the property located at _________________, as shown on the Tax Map of the City of New York as Block ____, Lot ___, and the building (“Building”) and improvements thereon (the Building, the improvements and such real property are hereinafter sometimes collectively referred to as the “Property”). LANDLORD hereby leases to TENANT approximately ______ (___) square feet (the “Equipment Space”) at the Property; together with such additional space on the roof of the Building (the “Antenna Space”); together with such additional space within the Building and on the roof of the Building (collectively, the “Cabling Space”) running between and among the Equipment Space and Antenna Space and to all necessary electrical and telephone utility sources located within the Building or on the Property. The antennas and all related equipment and shelters are hereinafter collectively described in Exhibit __ as the “Tenant Facilities.” The Equipment Space, Antenna Space and Cabling Space are hereinafter collectively referred to as the “Premises.” TENANT shall attach the antennas and install the equipment only at the locations and in the manner approved by LANDLORD as set forth in Exhibit __ (“TENANT’s Work Plan”).

Comment
The location, type, weight and size of all antennas, equipment and shelters comprising tenant facilities installed at any time during the term of the lease must be approved by Landlord prior to its installation.

Especially if the building is a residential building [and even in an office building] the location of the antennas and related equipment should be a matter that is carefully reviewed by a landlord. Minimizing interference with existing residents or commercial tenants should be a primary concern of a landlord. The location of the tenant’s facilities is only generally referred to in the above provision. A landlord should pay particular attention to the tenant’s “work plan” which should indicate where the antennas and related equipment will be located within the building. Make sure it is detailed enough so that the location of equipment can be adequately identified. A tenant should only attach its antennas and install equipment at locations and in the manner approved by landlord pursuant to such a tenant work plan. Any changes to tenant’s work plan [relating to the location of the equipment or anything else] must be subject to a landlord’s prior written approval. Aside from the interference issue mentioned above, landlord should also be aware that the installation of antennas, no matter where located on the roof, could damage the roof or other structural elements of the building. Accordingly, it should take appropriate measures to ensure that such damage will not occur [or at a minimum make sure that the cell phone provider has adequate insurance to cover the risk in the event damage occurs].

There is also nothing in the boilerplate language relating to the size, weight and type of antennas or the equipment except as it may be referred to in an exhibit describing “Tenant Facilities.” Quite often, an exhibit relating to “Tenant Facilities” will be a bare bones list showing the number of antennas and it will make non-specific references to cables and related equipment. This is not acceptable. A landlord should insist on a detailed list describing the “Tenant Facilities.” Today, the size and weight of the antenna(s) may be satisfactory. Tomorrow, however, the tenant could install new antennas that are twice the size and weight of those originally installed. This may not be what the landlord intended when it signed the lease. And size does matter as a larger antenna could be unsightly, and block site line views. If new or additional antennas weigh more, they may cause damage to your building. In addition, if there are no prohibitions in the lease relating to the type of antenna(s) that can be installed, a tenant could replace the antennas with those emitting different radiofrequencies. Antennas sending out different radiofrequencies than those originally approved could have an adverse health impact with respect to other occupants in the building, cause interference with other communications equipment in the building and allow the cell phone provider to use its antennas for purposes other than what is intended in the lease.

Maintaining and Repairing Tenant Facilities


Boilerplate
TENANT shall have the right to maintain, repair, replace and upgrade Tenant Facilities at the Site.

Comment
Although a tenant should have the right to maintain and repair its facilities at a site, a landlord must approve the replacement or upgrading of any tenant facilities in the event such equipment is not substantially equivalent to the equipment being replaced or upgraded, i.e. if the equipment being replaced or upgraded has a different radio frequency, size, weight or quality it is not substantially equivalent. Therefore, as noted above, it is vital that a detailed list of the equipment to be installed be attached as an exhibit to the lease. This will avoid any “misunderstandings” that might occur in the future because the list can be used as a baseline to check if any proposed new equipment is merely a replacement or an attempt to change the character of the equipment in a manner which may be objectionable to a landlord.

With respect to the installation area, tenant should agree to maintain the waterproof integrity of the building and the roof thereof and, except as prescribed by its work plans, no penetrations of the roof or exterior walls of the building should be permitted. In addition, a tenant should not make any improvements or alterations to the site except as specifically authorized and approved by landlord.

Tenant’s Entry Onto Site


Boilerplate
LANDLORD shall provide TENANT and its employees, agents and/or contractors with rights of ingress and egress to the Site for the purpose of installing, maintaining and operating the Tenant Facilities and related equipment, twenty four (24) hours a day, seven (7) days a week.

Comment
At this juncture, a balancing of interests must occur. Landlord should recognize that the cell phone provider may have a legitimate interest in having access to its facilities twenty four (24) hours a day, seven (7) days a week. On the other hand, there are valid security reasons why a landlord would desire to control such access. Providing that a tenant give landlord twenty four (24) hours advance notice of its need to enter the site, except in the case of emergencies [in which case it should give telephone notice of its intent to enter the site by contacting the building manager] and requesting that the building manager be notified of such intent to access the site is an appropriate demand by a landlord. In any event, a representative of landlord should have the right to accompany tenant during any such access, if landlord so desires. Moreover, if access to the site is requested at times which are not during normal business hours, tenant should agree to reimburse landlord for the additional cost of employee salaries and fringe benefits, including any overtime pay, paid by landlord, with respect to such access by landlord, in connection with any employee of landlord who supervises tenant’s access to the site, within a reasonable period from the date of its receipt from landlord of an invoice for such costs.

Permits, Approvals, Authorizations


Boilerplate
Before commencing any work relating to the attachment of the antenna or the installation of any Tenant Facilities, TENANT shall obtain any and all governmental permits or approvals that may be required for the installation and/or use of the Tenant Facilities and related equipment. TENANT shall provide LANDLORD with copies of all such requisite permits and approvals.

Comment
Ensuring that its building and occupants are safe is, of course, of paramount importance to a landlord. While obtaining governmental permits and approvals is a basic requirement for any radio antenna deal, a tenant should also be able to deliver to landlord, at its sole expense, a report from a licensed engineering firm that the tenant’s plans do not pose any safety concerns to the building and its occupants. This report should attest that the site can safely accommodate tenant’s equipment, together with an equipment layout plan and a radiofrequency electromagnetic fields emissions safety report prepared by a licensed engineer qualified to undertake such report. The purpose of the safety report is to evaluate compliance with the Federal Communications Commission regulations in connection with the usage of tenant’s antennas, together with the existing usage by other entities operating transmitters at the site. Tenant should provide landlord with a copy of the engineering report and safety report. This report can be used, not only to satisfy the landlord that the equipment is safe, but can also be used to show other occupants (or potential occupants) in your building that you have performed the proper due diligence to ensure that the building is safe for all. In the event such reports call for modifications to the site to safely accommodate tenant’s equipment, tenant should be responsible for making such modifications at its sole expense before equipment is installed. In addition, landlord should have the right to engage the services of an independent engineering consulting firm(s) specializing in the construction and maintenance of radio antenna equipment and/or radiofrequency electromagnetic fields emissions to review: (a) the engineering report and safety report; and (b) tenant’s work plan, as it may be revised from time to time, all at tenant’s sole cost and expense.

Note, here, that I am recommending a “team approach” to dealing with many of the issues that arise in a rooftop lease. As there are numerous technical aspects to such a transaction, be careful not to be a “jack of all trades.” Suggesting to a landlord that it enlist the assistance of an engineer as a consultant may be some of the best advice you can give a client.

Interference


Boilerplate
TENANT shall at all times operate its antenna and equipment in such a manner as not to interfere in any way with the transmissions of other radio or television systems at the Site. In the event of any such interference, TENANT shall immediately suspend the operations of its equipment until such interference is eliminated to the satisfaction of LANDLORD.

Comment
Tenant should acknowledge and represent that it has performed adequate testing for interference from any existing and/or currently proposed radio transmission and receiving equipment on the site, and represent: (a) the existing facilities do not interfere with its permitted use; and (b) the installation and operation of its proposed facilities will not interfere with existing facilities located at the premises. If the tenant experiences any interference problems caused by another party, tenant and landlord should agree to reasonably cooperate to resolve such interference.

Relocation of Facility


Boilerplate
If LANDLORD determines it necessary to relocate the Tenant Facilities, LANDLORD will have the right, subject to the following provisions of this Paragraph, and exercisable at any time after the first five (5) years of the Initial Term, but only exercisable one time during the Term, and only after providing TENANT with not less than twelve (12) months prior written notice, to relocate the Tenant Facilities, or any part thereof, to an alternate location (the “Relocation Premises”) on LANDLORD’s Building; provided, however, that: (i) all costs and expenses associated with or arising out of such relocation (including, without limitation, costs associated with any required zoning approvals and other Governmental Approvals, costs for Tests of the Relocation Premises, etc.) shall be paid by LANDLORD; (ii) such relocation will be performed exclusively by TENANT or its agents; (iii) such relocation will not unreasonably result in any interruption of the communications service of TENANT on LANDLORD’s Building; and (iv) such relocation will not impair, or in any manner alter, the quality of communications service provided by TENANT on and from LANDLORD’s Building. LANDLORD will exercise its relocation right by delivering written notice pursuant to the terms of this Agreement to TENANT. In the notice, LANDLORD will identify the proposed Relocation Premises on LANDLORD’s Building to which TENANT may relocate the Tenant Facilities.

If in TENANT’s reasonable judgment no suitable Relocation Premises can be found, LANDLORD may not exercise its relocation right described in this Paragraph and may not relocate or cause the relocation of the Tenant Facilities; provided, however, that if LANDLORD is exercising its relocation right described in this Paragraph in order for LANDLORD to comply with then current laws, rules, regulations or orders applicable to it, and in TENANT’s reasonable judgment no suitable Relocation Premises can be found, TENANT shall have the right to terminate this Agreement upon written notice to LANDLORD, without penalty or further obligation.

Comment
This provision is one of the most highly negotiated sections in a rooftop agreement. Landlord, at its sole option, should at any time be able to require tenant to remove or modify the tenant’s equipment or relocate it to another area designated by landlord, if the equipment causes physical damage to the structural integrity of the building, causes any interference or disturbs the operation of any other service, equipment or business of landlord or other tenants or creates or results in any noise, odor or nuisance tending to disturb any occupant of the building or areas adjacent thereto. Landlord should request that tenant agree that it must immediately shut off the equipment upon notification of any damage or interference, and may restart modified or relocated equipment to test for any damage or interference only with landlord’s permission, which should not be unreasonably withheld. If the equipment is not modified or relocated within a reasonable time period [i.e. thirty (30) days], landlord, can add a provision that, at its sole option, it may require that tenant remove the equipment at tenant’s sole cost and expense. Landlord, at its discretion and at tenant’s cost, should be able to reasonably interrupt service, or relocate or remove tenant’s equipment for repairs, maintenance or modification of the building, including, but not limited to, roofing, structural, electrical or mechanical repairs.

On the other hand, a tenant will argue that it intends to invest a substantial amount of money to install its equipment. Relocation of its antennas not only can be a huge expense but it may also render the site far less effective or even useless for its intended purpose. Further, if the tenant is forced to shut off its equipment or render it inoperative for any period of time, it would affect its ability to provide cell phone service to its customers. A landlord, while acknowledging these concerns must be able to have the right to relocate rooftop equipment at any time without restrictions for the reasons mentioned above. Therefore, a compromise may be to: (a) allow the tenant to terminate the lease if it has reasonable grounds to do so; (b) provide alternate space for the equipment in the building; or (c) consider sharing the cost of removal and/or relocation of the equipment.

Assignment and Sublet


Boilerplate
TENANT shall not assign this Lease or sublet, mortgage or hypothecate this Lease or the Premises without the LANDLORD’s written consent which consent may not be unreasonably withheld, delayed or conditioned.

Comment
A landlord should beware that many cell phone providers will attempt to co-locate with other cell providers at its site and reap huge profits which the landlord will not participate in unless the lease requires the tenant pay a portion of such profits to the landlord. Inserting a profit sharing formula 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 the facilities of others at the building? Are the additional frequencies safe? Will the new equipment damage the building, be an eyesore or block site lines? These are some of the matters that should be considered when crafting language that would modify a tenant’s standard assignment and sublet provision.

CONCLUSION

It may appear that a cell provider’s offer to lease a portion of the rooftop of your building is “easy money.” If a landlord agrees to the provisions set forth in a “Standard Rooftop Lease” without carefully analyzing each clause in the agreement, it will most probably be a decision that it will come to regret. Deciding to consult with a lawyer and other professionals (such as an engineer with a background analyzing radio antenna and other telecommunication transactions) who are familiar with the common pitfalls that are typically associated with rooftop leasing transactions can give a building owner the peace of mind of knowing that unintended results are far less likely to occur as a consequence of its decision to enter into such an agreement.


MEISLIK & MEISLIK
66 Park Street • Montclair, New Jersey 07042
tel: 973-783-3000 • fax: 973-744-5757 • info@meislik.com