Goodman on Out of Home Rent

Andy Goodman, Age Advertising

Today out of home leasing and development expert Andy Goodman reviews and comments on a rent section in an out of home lease.

Rent: Rent shall commence on the later of completion of the Structure or commencement of the term and shall be the amount of $_________________ payable __________________________________.

This rent section should be clearer as to when rent is payable. The completion of the Structure should state that all the governmental permits have been finalled/signed off on. The commencement date should state a firm date that the rent begins. I do like the, “commence on the later of,” language. With the complexity of the permitting process and the time it takes to fabricate steel and manufacture electronics it now takes longer to construct the billboard.

This section also leaves open for negotiating the payment on a monthly or annual basis. My experience has been that Rent is paid monthly in advance. Depending on the annual Rent amount this could be an area for negotiations.

More likely than not, the completion date of the billboard will happen some other date in the month than on the first of the month. Therefore, the Rent section should state that the Rent will be prorated for that month. Lastly, there should be a Rent increase of 5% every five years. Again, this is an area for negotiations.

If the Rent Commencement Date is going to take priority over the Completion Date of the billboard, this is an area that should be negotiated in further detail. A “Commencement Date” rent agreement should be a smaller amount of money than the full rent. Property owners have asked for one month’s full payment to cover each years payment, per year, until the billboard is completed. This raises another question, is there an end date to the annual payments to hold the location until the billboard is built? Traditionally I ask for no end date to these once a year payments, but I have many property owners who have agreed to a five (5) year sunset clause to complete the construction of the billboard. The Completion Date should also include an Exhibit section that allows for the future inclusion of the final signoff card from the Government entity giving final approvals.

You can reach Andy at andygoodman.age@gmail.com, 310-721-8422.

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