Last week out of home leasing and development expert Andy Goodman talked about issues which arise when a billboard is on a multiple tenant property.  Today he talks about visibility and rent resets

Visibility and Rent Resets

When you sign a lease and do business with a property owner, you’re accepting the property as is. That means you’ve conducted your due diligence and understand exactly what you’re getting—typically, freeway visibility. The rent you agree to is based on the value of that visibility.

If your advertising revenue declines—whether due to a recession, poor sales performance, or misjudged capital expenditures—you may find yourself in a difficult position. You’re locked into a lease, and if the sign isn’t generating the returns you expected, you’re stuck.

If visibility is compromised, the first step is determining the source of the obstruction. Is it on the leased property or from an adjacent parcel?

• If the blockage is on the leased property: Your lease should include a provision that allows you to demand the removal of any structures or obstructions added after the lease commencement that impair the visibility of the sign. This clause should explicitly grant you the right to restore the sign’s original visibility. If the obstruction is not removed, additional remedies should be available—such as continuing the lease without accruing rent for the duration of the obstruction. As a final option, the lease should allow for termination and removal of the sign if visibility cannot be restored.
• Blockage from Adjacent Property or Other Impairments
  If visibility is diminished due to factors beyond the leased property—such as a blockage from an adjacent parcel, reduced traffic, or legal restrictions on sign use or illumination—the lease should include protective provisions for the Lessee. Specifically, if:
  (A) the sign’s visibility is obstructed,
  (B) its advertising value is reduced due to lower traffic, or
  (C) its use or lighting is restricted by law,
• then the Lessee should have the right to:
  (i) reduce rent proportionally to the loss in advertising revenue (not exceeding the rent paid),
  (ii) suspend rent while the impairment continues, or
  (iii) terminate the lease and receive a refund of prepaid rent for the unexpired term,
  by giving written notice to the Lessor.
• If the impairment causes a significant drop in advertising revenue (e.g., beyond a defined threshold), these remedies should apply automatically. In severe cases—such as complete obstruction by new buildings or landscaping—the lease should also include an abatement clause, allowing the Lessee to remove advertising from the blocked face and pay only a prorated rent, typically 50% for the remaining visible face, until full visibility is restored.

Construction Impacts

If a construction project significantly affects visibility or impressions—especially if it impacts only one face of a two-sided billboard—the same abatement clause should apply. You should either pay only for the usable face (typically 50% of the rent) or, if the visibility is severely compromised, retain the option to terminate the lease entirely.

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