This is the second of our two-part review on tips to create a better billboard ground lease. More great information that will help you create a more advantageous document or avoid pitfalls.
Episode 49: Billboard Lease Trivia - Part 2 Transcript
This is Frank Rolfe, the Billboard Mastery Podcast. We're now going to wrap up our two-part series on Billboard Lease Trivia with Billboard Lease Trivia Part Two. When we last left off, we were going through the parts of a standard sign location lease. And again, I am not an attorney, never have been, never hoped to be, but I wanna go ahead and give you some things to watch out for in your sign location lease. Next time what you wanna watch out for is don't pin yourself down too tight in the manner you will maintain the sign. Typically, the property owner is gonna want you to put something in writing saying you'll keep the thing looking decent. Keep that very generic, say something like, "In a clean and slightly condition," because no one can really define what that means exactly. What is a clean slightly condition? Well, it could be many things. And when you have something in your lease that's very hard to pin down, it's very hard for you to get in trouble with that. I would not put in there that it will be beautifully painted and maintained and landscaped, 'cause that's not actually true. Once you build the sign, sure it'll look great initially, but like all things alive, it will start fading, rusting, things like that. You wanna keep it up to a certain standard, but you don't want the property owner calling you every week demanding you come out and repaint it again.
Next, you wanna have a provision that the person signing the lease warrants that they actually have the authority to sign the lease. Now, you would think that that goes without saying that someone who signs the billboard lease had the power to do so, but let me give you an example. I once had a lease unassigned at an Interstate 20 out in Terrell, Texas, and the person signed my lease, and then before I built the sign, fortunately, I got a call from someone who said, "I heard that you were in there looking to put up a sign," and I said, "Yes, I'm the one building the sign," and they say, "No, what do you mean you're building the sign? I'm the property owner." The person that I've been talking with was not the property owner. They were just one of the group of heirs who had inherited the property, they weren't even the majority owner of the property.
Even worse than that was, I once called off a sign on a property that said, "Property for sale." I called the phone number to see if I could build a billboard on it, and the person said, "Yeah, sure. How much would you pay me?" And I told them and they said, "Oh, okay, well then, yeah, we'll do that, now you have to pay us in advance." I said, "Okay." So I put my lease all together and took it down to them. The whole thing seemed really fishy to me. And then I checked on the property tax records, this person didn't even own the land. They were just a real estate broker. They were gonna try and pocket the money under the table, and I don't know what would have happened when the sign went up. I guess they would have claimed that I have been trespassing. Bottom line is you have to have something in your lease that says that the person signing it has the ability to sign it. Now, if someone signs it who doesn't have the ability, sometimes that can still get you what you want. In the case of the property owner in Terrell, I said, "Well, you signed it and you promised you had the ability, I've already pulled the permanent stuff." And they were able to convince the other heirs to go ahead and sign too, but you have to have someone, anyone make the declaration that they do in fact have that authority to get that done.
Next, as long as the person signing is bound by it, you have to make sure that all their future heirs are also bound by it, something that basically states that this lease is binding on all of the future assigns, heirs, executors, representative, and successors, including any subsequent owner, because land changes hands. Sometimes a whole lot. I've had property where the land has changed hands just in a 15-year billboard term, three or four times. So you can't have someone who buys that land down the road, say, "Wait a minute, I'm not bound by this lease. I didn't sign the original lease." So you need something in that lease that states that everyone who owns the land after the person you signed it up with is still bound by it. Next comes the insurance part of a typical lease, and this you have to be very, very careful on. Do not guarantee insurance beyond what you can actually obtain. So if you can only get half million dollars of property insurance or liability of a million, make sure you stipulate that in the lease. Don't go promising that you've got $10 million of coverage when you do not, 'cause you'll get sued for that.
Now, most property owners aren't looking for a huge amount on there, to be honest with you. Typically, a million of liability seems to be about all that they ask, 'cause they really can't visualize what that sign could do that could 'cause more damage to net in their property, and particularly when it's out in a rural area. But again, before you put that in your lease, talk to your insurance agent and find out exactly what you can safely offer, because that would be based on what you can safely obtain. Next, you wanna have a provision that any notice in that lease has to be given in writing and you have a certain period of time to respond. Because here's what happens, let's assume someone sells that land to somebody else, and you were supposed to send the ground lease to that next owner, but that guy just, he never kinda told you, and you keep sitting in the checks and now you're in default because the other guy never got paid in six months.
Well, under this paragraph, you need something where if the property changes hands or anything that happens, they must notify you immediately in writing. You can't have it just haphazard where they called you, then they'll say, "Oh yeah, I called you, I left a voicemail, don't you remember?" Now you're into a he said, she said contest, which is never successful in a court of law. You gotta make sure that whatever you do, that there has to be fair notice given on anything regarding the lease.
Next, you typically have default provision. If the other party defaults, then the defaulting party has the right to cure the default. That's a very, very important item. Now, the reason that's so important is, let's assume you sent your rent to the property owner as you do every month, but this time it was a little different because the person at the post office wasn't paying attention and they dropped your letter with the stamp on the ground, and it stuck to the bottom of a cart and it got wheeled off to the other side of the post office, never to be seen from again. You have technically defaulted on your lease. They didn't receive payment. Well, you don't want them to say that your lease has been the negated, right? You want the ability to cure that, so you need what is called a cure period in your lease, which gives you the right to solve that. In this case, the cure period would be that you'd get a certified letter saying, "I didn't get your rent, and you're in default," and then you would run down and pay them so that your lease is not defaulted.
You have to have a cure period. If you do not have a cure period, you will be always having a little bit of stress 'cause you're never really sure what's really going on. Next, you want to have a provision that everything related to that billboard is your property and not the property owner's property. This is an absolutely vital provision of any lease because what's happening here is in the event that you cancel at some point or wanna remove the sign, let's say the highway change direction or shut down or there's a horrible blockage, you have to have the ability to remove that sign. It's supposed to be your property. In some states, if you don't stipulate that everything is your property, the property owner will claim it's theirs. They'll claim that you built it, and once you build it, it became part of their land. Don't fall into that trap.
Also make sure, however, when you talk about removing the sign that you're clear that you only remove the sign from roughly the ground up, because after the ground, down in the ground, not only do you have a pole, pipe made of wood or metal, but it's typically concreted in. And normally, when they build the billboard, it becomes what they call bell-shaped, down at the bottom there's some degree of cave in. So that concrete thing is not just a cylinder, it looks instead like a triangular object. It's impossible to get it out of the ground. Insanely expensive. So make sure that you own everything from the ground up, but you don't really wanna own things from the ground down because that foundation, to remove that foundation would be a whole lot of money.
Finally, as far as how people sign the lease, you may or may not need to add the concept of notarization. Many people like to go down and put their lease into the county lease records, and you typically can't record the lease in the absence of notarization. Now you need to find out if you want to do this, what the county court requires to notarize and record that lease. Sometimes they'll do it if only one party is notarized, sometimes they need both. Many lenders require the lease to be recorded. Many sign companies record the lease, so there's a public record of what the lease is. Now, if you're going to record your lease, you might wanna go ahead and X out the amount of payment, that way other sign companies don't know what you're paying, so they can't literally try and jump your lease.
Many of your tax assessors will allow you to do that to basically draw through the price and no one can read it, but it is important if your lender is gonna require that the lease be recorded, that you do have sufficient notarization that you can in fact record it. Otherwise, you have to go back and get the lease resigned all over again. Again, these are just some various tips on a successful billboard lease. I'm not an attorney. I'm not giving legal advice. I'm simply trying to tell you some practical trivia about leases to hopefully make your lease a better one. This is Frank Rolfe, the Billboard Mastery Podcast. Hope you enjoyed this, talk to you again soon.