A construction clause allows a landowner to terminate a billboard lease if construction of a new building requires the removal of a billboard even if the billboard is outside the building’s footprint.  That’s the lesson of Burkhart Advertising v Lowes Home Center.  Here are the facts.

• In June 1999 Carl Wendel entered into a lease to allow Burkhart Advertising to construct a billboard on his property.  The lease contained a provision allowing Wendell to terminate the lease “upon commencing construction of a permanent substantial building on said premises requiring removal of Lessee’s sign, structures and equipment.”
• In 2000 Wendel entered into negotiations to sell the property to Lowe’s Home Center.  Lowe’s engineering manager sent Wendel a letter stating that development required the sign to be removed because (1) the sign failed to meet clearance requirements for relocated power lines (2) the sign conflicted with construction of a relocated water main (3) the sign was in an area where the fill from the building pad would go (4) the sign counted against the permitted site signage for the proposed store.
• In October 2000 Wendel terminated the lease with Burkhart.  Burkhart did not remove the sign
• In May 2001 Lowe’s had the sign removed.
• In August 2001 Burkhart filed suite for breach of contract.  Burkhart’s attorney’s argued that construction of the building did not require removal of the sign because the sign was not located within the footprint of the building.
• Indiana District Court ruled Wendel and Lowe’s were within their rights to terminate the lease and remove the billboard.  The court concluded “the logical interpretation of the Lease Agreement is that the Lessor may terminate it upon commencement of construction of a permanent substantial building if construction of the building requires removal of the sign.”  It accepted the 4 reasons put forward by Lowe’s as sufficient because Burkhart did not enter expert opinion to the contrary.

Billboard Insider’s Take:  Sometimes you have to include a construction clause to get a lease.   Construction risk can be mitigated by asking for the right to relocate a billboard on the property in case of construction.

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