Glossary > Cell Tower Ground Lease
What is Cell Tower Ground Lease?
A cell tower ground lease is a legal agreement between a property owner and a wireless carrier, allowing the carrier to install and maintain a cell tower on the owner’s property. In exchange, the property owner receives rent payments from the carrier for using their land.
Why Are Cell Tower Ground Leases So Valuable?
The demand for cell tower sites has never been higher as wireless carriers look to expand their coverage and improve their networks to meet the growing demand for mobile data. As a result, cell tower ground leases have become highly valuable assets for property owners, providing a steady and reliable source of income for decades to come.
Ground Leases Benefits for Tower Companies
- A ground lease allows tower companies to build and maintain a cell tower on a small parcel of land without the massive capital investment and continued management expenses.
- When a tower company is no longer using the property, it’s left with a small parcel of land with limited marketability. A ground lease allows tower companies to use the land for a set period of time without worrying about future marketability.
- Tower companies can also take advantage of tax benefits through ground leases. By converting a ground lease into a long-term easement via a lease buyout, tower companies can turn operating expenses into capital expenditures, which is advantageous for the landlord both short and long-term. In the United States, the IRS allows tower companies to depreciate their cell towers for 39 years, which can provide significant tax benefits for tower companies. When a tower company buys out a ground lease, they can capitalize the remaining lease payments and add them to the tower’s value.
- Because the land is owned by a third-party, tower companies don’t have to worry about the costs associated with property maintenance and upkeep. This allows tower companies to focus on their core business operations and invest in new technologies and infrastructure.
Understanding the Terms of Your Lease Agreement
When negotiating a cell tower ground lease agreement, it’s essential to understand the terms and conditions of the contract thoroughly. Some key terms you’ll want to pay close attention to include:
- Lease duration: How long will the lease last, and what happens when it expires?
- Rent payments: How often will payments be made?
- Rent escalations: Will the rent increase over time, and if so, how will the increases be calculated?
- Maintenance responsibilities: Who is responsible for maintaining the tower and the surrounding property?
- Access rights: Will the carrier have the right to access the property, and if so, under what conditions?
- Zoning and permitting: Will the carrier be responsible for obtaining any necessary permits or approvals for the tower, or will you be responsible for these tasks?