Expiry Is Approaching, so What's Next for Your Mobile Base Lease?
January 11, 2018
With a number of mobile base leases up for renewal, some landowners have expressed concern over the renegotiation tactics of carriers including Telstra, Optus, Vodafone, TPG, and NBN. Many telecom leases throughout Australia commenced in the early 2000's with initial lease terms of 15-20 years so now that so many of them are approaching expiry, some wonder what to expect for the future of their mobile base leases.
As expiry approaches, often telcos will approach landowners with rent reduction demands that could potentially reduce the landowner’s telecom lease rent by half. These increasingly aggressive renegotiation and capex cutting tactics are intended to “bully” the landowners into allowing the telcos to remain in holdover at the current rental rate indefinitely. Some of the more common tactics used by telcos can include:
- Threatening to vacate the site and relocate to another site – While this is unlikely to actually happen due to the time and cost involved in developing a new site, this type of threat is intended to “bully’ the landowner into agreeing to accept a lesser rental rate rather than risk losing the annual mobile base lease rent altogether.
- Remaining in ‘Holdover’ – Holdover is when the tenant (in this case Telstra, Optus, Vodafone, TPG, or NBN) remains on the property after the expiration of the lease. While the annual lease fails to renew, the telecom site remains in place and active at the same rental rate on a month-to-month basis, indefinitely.
By remaining in holdover, the telco avoids paying an escalator to the landowner and the rent stays the same for as long as the site remains active. If the landowner does not accept further rent after the lease expires, the tenant is considered to be trespassing, and an eviction may be necessary. Holdover can be problematic for the landowner because the telcos’ standard agreements are heavily weighted in their own favor and include provisions that greatly compromise long term tenure security for landlords.
- Lack of engagement with lease extensions – The telco will limit contact with the landowner and intentionally fail to engage in lease renegotiations ultimately leading to holdover.
- Threatening to exercise statutory rights under the Telecommunications Act 1997 – The Telco could claim to be entitled to remain on the landowner’s property pursuant to the service of a Land Access and Activity Notice (“LAAN”). In doing so the telco claims that they are not required to enter into formalised lease or pay rent to the landowner.
- Electing to remain on site post lease expiration – The telco will remain on the landowner’s property after the lease expires and irrespective of any termination notice because of its alleged rights under the Radiocommunications Act of 1992 and the subsequent Telecommunications Act of 1997.
The telco may present one or more of these options as if there is no flexibility or room for negotiation by the landowner. This isn’t necessarily true however, the bottom line is that the telcos have teams of experienced real estate, finance, and legal experts working to protect their interests while the landowner often does not.
The benefit of working with Lease Advisors is that our team has decades of experience working with telcos to successfully negotiate lease terms that protect the interest of the landowner. Our partnership with InSite Wireless Group, LLC, one of the largest privately held telecom companies in the United States, affords our clients the benefit of considerable expertise in the ownership, management, and operation of wireless sites, domestically and internationally. The experienced consultants at Lease Advisors can help you maximise the amount you receive from your lease and proactively work to counter threats of termination or holdover.
When it comes to choosing a partner to help manage your telecom leases, you can rest assured knowing that our team of consultants is committed to helping you safeguard your interests and maximise the earnings from your lease.