At the IBO Conference, Richard Rothfelder, Chris Rothfelder and Mike Falick had an engaging discussion about aspects of billboard law focused around their new book. Continuing that conversation, here are more excerpts from that discussion as they consider some of the key legal issues facing the OOH industry.
Leases, Easements, and Contracts
You’ve said Chapter 4 of the book on leases and contracts may be the most valuable section. Why?
Mike Falick: It includes forms — and they’re good forms. I say that modestly because I helped create and revise them. The chapter covers ground leases, easement forms, and guidance on recording those instruments. It’s the practical core of what most operators deal with day to day.
What lease issues are you seeing litigated most often right now?
Mike Falick: Rights of first refusal and their enforceability. That comes up a lot. The other issue we’re tracking closely is automatic renewals. Many leases include automatic renewal on like terms — and that sounds reasonable until you do the math. If you’ve got a 10% escalator in a $1,000-a-month lease, by the end of the second renewal term you’re close to $2,000 a month. Richard wrote an article earlier this year that worked through that math clearly. The fix is simple: state the exact dollar amount in the renewal clause rather than tying it to ‘like terms,’ so you avoid compounding escalators that run away from you over successive renewal periods.
Buying and Selling Billboard Assets
What should operators know when drafting asset purchase agreements?
Chris Rothfelder: There’s no one-size-fits-all. I have different forms depending on the size and complexity of the deal. For a small transaction — a couple of signs, a few thousand dollars — a one-page memorandum of agreement may be all you need. For a mid-range deal you want standard reps and warranties but don’t need to go overboard. For a full plant acquisition, you’re looking at a thirty-page agreement with comprehensive representations, indemnities, and quite possibly a covenant not to compete.
What restrictions apply to non-compete clauses in these deals?
Chris Rothfelder: They have to be reasonable in both duration and geography. You can’t keep someone out of the workforce for twenty years, and you can’t cover the entire United States. The geographic scope generally needs to be tied to where the seller actually operated — the counties or markets where they had signs. Courts will scrutinize those provisions, so they need to be drafted carefully.
When should buyers push for strong representations and warranties?
Chris Rothfelder: When there’s uncertainty about the underlying leases or permits. If you’re buying a group of signs where the lease was written on the back of a cocktail napkin — or the landowner can’t even find the lease — you want a strong rep and warranty from the seller, and a solid indemnity clause so that if a problem surfaces after closing, you have somewhere to turn. The same applies to permit issues: if there’s a question about whether a sign is too close to the right-of-way or the face is oversized, you want protection before the Department of Transportation comes knocking two months after you close.
Interested in learning more? You can purchase a copy of Rothfelder & Falick on Billboard Law through this LINK on the Billboard Insider web site.
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