Lease Audits – An Essential Element of Site Modification Project Planning
By Jared Williams
Following up on “Lease Audits – An Essential Element of Proactive Site Project Planning” previously published in the February 26, 2015 Md7 Communiqué, cell site leases are an essential part of each cell site. As technology continues to evolve and carriers aggressively work to improve their network coverage and capacity, site modification projects are becoming more and more necessary. This means that cell site leases are being modified more often than ever before. As a result, it is critical that carriers fully understand their cell site portfolios and analyze them prior to every site modification project.
Now that landlords are being contacted with requests for modifications more frequently, this has led to a massive increase in landlord sophistication and expertise when it comes to the wireless industry. If they did not know it before, landlords now understand that their property, their buildings, and their towers are a valuable asset. As a result, landlords are often more knowledgeable about their leases than the carrier. A lease audit will change that.
Site modification projects are complex, and driven by the need for increased capacity and coverage. As a result, these projects often need to be completed as quickly as possible to get the modified sites on- air. To ensure that these deadline- driven projects are completed on schedule, every effort must be taken to be proactive and ensure that any possible roadblocks are predicted and planned for. Obtaining knowledge of the items below is paramount to achieving this goal.
- Does your lease permit modification of the site or equipment? – Before resources are allocated, equipment is ordered or on-site work is scheduled, it is imperative to know if modification is even permitted. This seems like a basic question but it is one that is often overlooked. Make no assumptions here. A project manager should always ensure they know what modification rights exist before starting the project.
- What, if any, new leasing documents must be executed? – While site modification may be permitted, the lease could, and most likely will, have requirements for landlord notification, landlord consent, or possibly the execution of a new amendment to the agreement. Understanding what is required for each of these documents will allow for more accurate forecasting of site completion. The worst thing that can happen is to have a crew arrive on site only to have them sent away because an amendment is needed. The project is now up to several months behind schedule unnecessarily.
- What are your access rights for the site? – When is the carrier permitted to be on the site? Must the carrier provide additional documentation before going on site? Must the landlord have a representative on site? Knowing whether it is necessary to possess an up- to- date certificate of insurance, security clearance, or the landlord’s express permission to access the site can be essential in preventing delays or unreasonably upsetting the landlord. Showing up to a site unannounced and unprepared can lead to a lot of headaches down the road (see Item 2 as well).
- What is the current rent? – Knowing the current rent on a site, and comparing it to the market rates in the area will provide the carrier with the knowledge necessary to successfully negotiate proposed lease terms. Arbitrarily increasing rent to complete a site modification will only drive up costs exponentially in the long term. Network costs are going to continue to rise, and carriers will lower their plan prices to compete for business. Understanding and effectively managing the costs associated with real estate in the wireless industry is going to become more and more important.
- What are the current equipment entitlements? – Understanding your current equipment entitlements will allow for better planning of your leasing activities. If the proposed equipment configuration will not exceed existing entitlements, then perhaps no lease modification or increase in rent will be required. Perhaps, due to the addition of new equipment, there is a need to increase the leased area. It’s better to find that out during the audit than when a crew shows up on a site to install the equipment.
- What, if any, engineering studies will be required? – Knowing ahead of time whether or not a structural analysis, geotechnical report or wind study will be required is an essential time-saver. These studies can often take weeks to complete, so knowing when they’re required is a must. Another element to this is knowing whether or not the landlord runs their own studies or requires the carrier to order them. If the carrier pays for their own structural analysis but the lease and/or landlord requires their own engineering firm to do so, the carrier could end up paying for the same study twice!
- What was required the last time the site was modified? – With a guide to what was required the last time a site was modified, you will have an excellent heads-up as to what lies ahead. Did the landlord charge miscellaneous fees? What were their Notice to Proceed (NTP) requirements? Who signed their documents? Did they require the utilization of their own engineering firms? These are just a few items that would save time and money on the proposed site modification.
- Who currently owns/manages the site? – Cell site leases change ownership more frequently than ever. With the growing presence of lease buy-out companies and the continued acquisition of leases by various tower companies, it is important to know who currently owns the site. Why spend three months getting ready to modify a site only to find out right before you go out to the site that the lease is now controlled by a tower company and not by the property owner.
Proactivity cannot be stressed enough when it comes to effective site modification project planning. Every day, projects run into delays, roadblocks, and outright “site-killers” because not enough attention was given to the lease prior to engaging in on-site activities. The problems can be the difference between getting a site on the air in time and on budget or being delayed several months, resulting in deficiencies to network capacity and coverage. Proactively addressing the lease for each site at the beginning of every site modification project, and knowing the information outlined above will provide the head-start necessary to ensure success.
As a service provider to the wireless industry, we would like to share our insights, observations, and analysis about what is happening from time to time.