JD Supra published an article titled Outdoor Advertising: How Billboard Landlords Can Protect Their Property and Their Profits. The author counsels landlords on what to ask for in a billboard lease. Here are five things the author recommends together with Billboard Insider’s response.
“A ground lease is the preferred means of agreement…A license could be used, that that has attributes that are usually objectionable.” Billboard Insider would never put a billboard up under a license agreement. A license is a contract that allows a person to conduct an action on the landlord’s property. Most licenses are freely revocable. Insider has read legal cases where landlords seek to keep a billboard at termination by arguing that they agreed to a license and not a lease. A lease gives you the billboard company an exclusive interest in the property for a fixed term. Most leases are revocable only on a matured event of default. And most leases specify that the billboard is the property of the billboard company.
“Your ground lease should be crystal clear as to the part of your land you are leasing…Designate an area on a survey or add a diagram to the lease…” Billboard Insider agrees. This protects both parties. Both sides need to know exactly where on the property the billboard sits. A well identified site can protect your billboard company from a future owner who has other plans for the portion of the property your billboard occupies.
“Along with a slightly lower flat rate, attach a provision entitling the lessor to 15-20% of all revenue generated…during the lease period.” Billboard Insider doesn’t mind agreeing to a 10-20% of gross lease for a good site, especially if it allows us to lock in a long term lease. Many of our readers try to negotiate a low fixed rent. This can sometimes backfire. If your rent is too low in relation to the money you make on the billboard you will create resentment on the part of your landlord.
A provision that requires an ODA lessee to conform to community standards or restricts all advertising related to “sin” businesses or political messaging can avoid potential future backlash. This should be handled on a case by case basis. Some conservative farmers will only permit a billboard if there are content restrictions. This is less likely in a large urban market. You need to be careful about language restricting advertisements for competing businesses. Insider was negotiating with a shopping mall about putting up a digital billboard. The shopping mall didn’t want to permit any advertisements which would compete with any tenants of the shopping mall. This would eliminate 10 of the to 20 leading out of home advertising categories from going on the billboard.
If, as lessor, you are worried about ODA potentially negatively affecting your resale value, then include a provision that allows you to terminate the lease on sale, but be prepared for pushback since the lessee will incur the expense of removing its improvements. This is a dealbreaker for Billboard Insider. We would never agree to a new lease which allows a landlord to terminate the lease and make us take down the billboard without compensation, especially if we are putting in an expensive digital billboard.
What do you think of these lease provisions. Email davewestburg@billboardinsider.com or use the form below.
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