Today out of home leasing and development expert Andy Goodman evaluates the representations language of a typical out of home advertising lease.  Andy’s comments are in italics.

Representations:  Lessor represents that it is the owner or the authorized agent of the owner of the Property and has full authority to enter into this Lease Agreement as or on behalf of owner.  If ownership of the Property changes, Lessor shall notify Lessee within thirty (30) days of such change and shall furnish the new owner with a copy of this Lease Agreement.  Lessor agrees not to enter into any lease or other relationship with any of Lessee’s competitors for the erection, operation or maintenance of any outdoor advertising structure on the Property or on any adjacent property.

We want to know that the person who is signing the lease has authorization.  Obviously you’ve done a title search so you know who the owner is – individual, family, trust, corporation, LLC.  If it it’s a trust, Inc. or LLC you need to know that you’re getting the manager or partners to sign. With an LLC or Inc. you may want to ask for the incorporation documents to see who the managers are and get the right signatures.

If ownership changes you want to be notified.

Having a memorandum of lease recorded is important here.  What if a billboard has not been built and the existing landlord sells the property but doesn’t tell the buyer that there’s a lease? I had this happen back in early 2000’s. There was no constructive notice, we hadn’t recorded the memorandum of Lease, and the property owner didn’t disclose the current Lease. At the end of many discussion we had to remove the billboard from the property.

As a Lessee or Lessor the restriction on doing business with a competitor needs more detail. Calling out the property must specifically state that a competitor cannot place a billboard on the same APN. If the Lessor owns adjacent property then those APN’s must be called out too. Depending on the spacing from the proposed billboard to a possible second location on an adjacent property, the Lessor may demand the Lessee build on that property too. If not, the Lessor may not want to give away the restriction on the adjacent property. I’ve had situations where I’ve built out in the desert. The Lessor owns multiple APN’s but my competitor had not restricted the adjacent properties. This was a good opportunity for the Lessor.

For the protection of both the Lessee and Lessor this section should also restrict the sale of an Easement to any other entity other than the Lessee, Lessor or the new purchaser of the entire property.   Several companies have formed to purchase easements around the existing billboard with no other intent than collecting a footprint of billboards within markets. Lessors need to be very careful of these companies.  There are many reasons not to do business with them. The most important is that the money offered may be a short term fix for the Lessor, but in the future during the sale of the property, the Lessor must disclose the Easement, the ingress and egress, the visibility triangle and that the new Lessor will never receive rent and have many additional restrictions. In addition, some of these Easements are in perpetuity. 

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