Today out of home development expert Andy Goodman talks about how to deal with a landlord who says they own a billboard.

What to do when a landlord says they own a billboard

There are a few possible situations when talking to property owners who say they own or want to own the sign.  The first is that the billboard is already existing and the property owner is investigating their options during the renewal negotiations.  The first thing I do is ask the landlord to send me all the historic documents that they have, including leases and addendums.  I read the documents starting with the earliest and most of the time I find something in the lease that says that all improvements to the property by the Lessee belong to the Lessee.  Sometimes 1 or 2 amendments into a lease you find that the property owner wouldn’t renegotiate a new lease with the Lessee unless the Lessee was willing to give them ownership of the billboard.  I’ve run across a couple of old 3M units where 3M was willing to trade ownership of the billboard to the landowner in exchange for an extension of the lease. But, if the Lessee does own all the improvements, at this point I explain that the billboard company will either let the Lease go month to month or remove the sign from the property if a new Lease isn’t signed. If the municipality doesn’t allow for new billboards to be built I ask if the property owner is okay with losing the revenue. The other option is for the property owner to negotiate a new Lease or hire a Consultant to renegotiate the Lease.

Sometimes the landlord is right

When I worked in New York in the early 2000’s I was surprised to find that the permits issued for billboards and walls, even though they were paid for by the Lessee, at the termination of the Lease the permits stayed with the Lessor. So in New York if a property owner tells me they own the permits, the sign and the wall, I do some additional investigating and have found it to be true. I don’t know if this is still true, but I’m thankful this is not the case in California at least through my experience.

Explaining the big picture

On a new build if a property owner wants to own the billboard, most out of home companies will walk from the deal and go to the property owner next door.  If I’m looking for a new location for myself and a property owner says “I want to own this billboard” my response is to tell them about the hard and soft costs of owning the billboard. I also explain the downside of owning the property and the billboard. At that point the billboard becomes an improvement to the property and this increases the taxes owed on the property. When the billboard is owned by the Lessee/Tenant the billboard is a trade fixture and goes away when the Lease expires. Therefore, the property owner doesn’t owe any additional taxes for the improvement on the property. If the landowner still wants to own the billboard I offer to do the work as a consultant, to get it permitted but I also want partial ownership in the sign for generating the idea.

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

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