Lease Audits – An Essential Element of Proactive Site Project Planning
by Jared Williams
Like it or not, cell site leases are a crucial element of wireless networks. Without these leases, equipment does not get installed, network upgrades are not deployed, and your cell phone becomes nothing more than an expensive digital calculator or music player. Leases are a key element of every cell site, and must be treated as such for every project undertaken at a cell site.
For one of these projects to be successful, it goes without saying that proactivity and proper planning are necessary. For those that have managed site acquisition projects within the telecommunications industry, it is easy to understand just how true this statement is. Having years of experience in working on, and overseeing these types of projects, I can assure you that auditing the leasing documents for each site should be an essential element of this planning. Each site is unique, and when it comes to the deconstruction of a cell site, understanding each party’s rights and obligations under the lease will guide the actions taken at each individual site.
A carrier’s rights and obligations within a lease play a major role in defining the limits to any on-site activities. To better plan for these activities, and minimize the roadblocks that delay many lease termination and deconstruction projects, there are many pieces of information that should be extracted from each lease during an audit.
What are your termination rights?
Knowing whether or not a lease can even be terminated early should be the first step in any termination or deconstruction project. As landlords will often try to prevent the termination of their cell site lease, it is imperative to understand exactly what the carrier’s rights are, and what rights will be exercised to terminate the lease. This will ensure that the rights utilized will take you down the path of least resistance when terminating the lease. For example, should the lease be terminated for economic or technological reasons? Perhaps the lease permits at-will termination as well. Understanding that certain termination rights will be more difficult for landlords to dispute will prevent further problems down the road.
Will you have to pay a termination penalty?
When budgeting for a decommissioning project, penalties can drive costs up quickly. A carrier should be aware of the additional costs that they’ll be exposed to when terminating leases. Knowing this ahead of time provides the carrier with the ability to consider other termination options that might allow them to avoid these penalties, or plan for the additional expenditures that will be associated with the project. Rest assured, the landlord will know if a penalty is owed or not.
What is the lease expiration, or term expiration date?
If the expiration date is quickly approaching, it might be better to simply not renew the lease, rather than terminate it via another provision of the agreement. This could prevent disputes over termination, and save rent. Knowing this ahead of time also provides guidance when it comes to scheduling physical work on a site. If the term end-date is quickly approaching, this site will need to be made a priority for your general contractors performing the site deconstruction.
Does the lease permit you to leave any equipment on site?
Does the lease require the full removal of equipment and restoration of a site? Perhaps it permits the carrier to leave a generator, shelter, platform, or some other infrastructure on site? Knowing this information could drive down costs. Leases are often structured in such a way that certain pieces of site infrastructure are to remain behind when the lease is terminated. Items such as shelters, generators, room additions, interior walls, platforms, etc. are often expensive to remove. If the lease requires that they be left behind, then these cost savings can be anticipated. It also ensures that deconstruction crews are not being directed to remove equipment that legally belongs to the landlord.
What is the current rent?
Knowing the current rent on a site allows for high rent sites to be made a priority for termination. Rent can be several thousand dollars per month at many sites. If this information is ignored, then the carrier could end up paying a substantial amount of rent that could otherwise have been avoided.
What are your access rights?
As landlords will most likely be upset that their lease is being terminated, they will often do what they can to prevent deconstruction of the site and prolong their rent payments. Understanding your access rights will allow for accurate and effective discussion about this topic with the landlord, and ensure that the deconstruction crews are acting in full compliance with lease terms. This also provides the carrier with the information needed to hold the landlord’s feet to the fire and ensure that if the landlord wants the carrier to remain in compliance with the lease, they must do the same as well.
Knowing this information also leads to better scheduling on the part of the deconstruction crews. The difference between having 24/7 access and being limited to work on weekends, or only when supervised by the building manager, will have a substantial impact on the scheduling of work on-site. Applying for a road closure permit and a crane rental for a Wednesday afternoon does no good if you can only work on the site on weekends. As these permits and rentals must be obtained well in advance, this could set back work on a site by weeks or even months.
What are the restoration requirements?
Must the site be restored to its original condition less wear and tear? Must all work be completed only one foot below grade level? Understanding what condition the site must be left in will ensure that a proper scope of work is developed for the site. It will also provide the information necessary to generate more accurate cost estimates for the physical work on-site and enable more accurate scheduling by the deconstruction crews. Once landlords are informed that their lease will be terminated, they will make sure they are intimately familiar with their lease and the restoration requirements for their site. Landlords will inspect their sites to ensure the carrier fulfills its obligations.
Frequently, landlords will also seek to get additional work performed by the carrier as well. Often, landlords want roofs repaired, buildings repainted, water tanks repainted, and other miscellaneous services or items. When these demands are made, understanding what is and is not required per the lease is crucial to ensuring that no unnecessary work is performed, and that no unwarranted costs are incurred.
The items listed above are just a few of the pieces of information that are essential to an effective lease audit, and in turn, effective project planning. When planning a lease termination or site deconstruction project, careful consideration should be given to each and every lease. Proactivity cannot be stressed enough when it comes to effective site project planning. Every day, projects run into delays and even legal issues because not enough attention was given to the lease prior to engaging in on-site activities. Proactively addressing the lease for each site at the beginning of every lease termination or deconstruction project is the first step to ensuring that a site is off air on time and deconstructed on budget.