At The End One of the key features to a successful billboard ground lease is not what happens at the start of the lease, but what happens at the end. In this Billboard Mastery podcast we’re going to review the strategies regarding how to handle what happens at your ground lease’s conclusion.
Episode 147: The Key To A Good Ground Lease Is What Happens Transcript
There are a lot of paragraphs in your standard billboard ground lease. You try and cover everything, you try and cover overblockage to the sign, you try and cover on insurance... All these different items in that lease. And of course, you're very focused on the amount of money you're going to pay for the ground lease, whether it's a percent or a base minimum, or perhaps both. But one of the most important things in your lease has nothing to do with how much you're going to pay, where you're going to put the sign. It all boils down to simply one item, and that's what happens when the lease comes to an end. This is Frank Rolfe with the Billboard Mastery Podcast. We're going to talk about what you need to make sure a good lease has in it, on the final moments of that lease's life. And let me point out, originally, that billboard ground leases are typically very long-term. A standard billboard ground lease can easily be a 15-year with a 15-year option, and that option is at the pleasure of the billboard owner. So that's effectively a 30-year lease. I've seen leases longer. I've seen 50-year leases. I once had a 200-year lease. I think that's plenty long. And I think we would all agree that over the span of the decades, often the person that you worked with is no longer around. The average life expectancy of a male in the United States is running a little under 80. And if a property owner is 65 when you sign the deal and it's got 30 years on it, more than likely they're not going to be around. Or if they are around, you know they forgot about the lease. No one really keeps a list in their day-timer of things they need to remember to do 20 years from now, or 30 years from now. Yet a lot of billboard companies don't think clearly on this one issue. And what they do is the billboard lease has an end date.
Let's say you're signing a lease up right now in 2026, and it's got an end date in 2046 on July 14th. What does it mean? It means when that lease ends, it ended. You have no right to have the sign there anymore. And in some states, when you operate a billboard after the lease is there, all of the revenue you collect has to go to the property owner, because it's almost like stolen property. It's almost like trespassing. So if we all agree..."Okay, wait, well, yeah, people will probably forget about the end date. Heck, you may forget about the end date yourself," then you need to have some protections in that lease to make sure you don't run afoul of the law. And the best way to do that is to have the lease continue on after its expiration on, for example, a month-to-month basis, unless somebody says stop. And of course you're not going to say stop, and probably the property owner isn't either, because they already forgot that it ever ended. But if you have in that continuity provision... And I would have your attorney make sure that you've got it worded just right for your state... More than likely what it means is when it does come to the end, it just keeps going. Months, years, decades, with no issues, no legal ramifications, no problems at all. So having an open-ended end to the lease is one of the most critical items you have in the agreement. Now, some people would say, "Well, why don't we just have it roll over again? Why don't we have it that if they don't cancel at any moment, it's going to roll another 10 years or 15 years?" So instead of that being a 30-year lease, it's a 45-year lease, or a 60-year lease, or going into the hundreds of years. The problem is, it's very hard when you're trying to get that lease signed for the lessor, the property owner, to agree to that, because they'll look at that and say, "No, wait a minute here, this is a trap. You know I'll forget this lease. So what you're going to do is you're going to entrap me into this endless 15-year thing, and every time I remember it one day later, you'll say, 'Oh no, I got another 15 years now. Call me in another 14 years and 364 days.'" So they're going to object to that, typically. But when you have it roll into a month-to-month, they can't really object, right? If they remember that it ended, well, they can contact you and say, "Hey, your lease is over now. We need to renegotiate a new one." And they're comfortable with that. Even though you and I both know that the person you're talking to is more likely not going to be alive.
And if they are alive, they forgot about you decades earlier. You simply keep writing the checks, they keep depositing them, and no one ever knew that that lease has ever, in fact, come to an end. You know, I've bought a lot of billboards over the years, and I've bought leases that had already expired years and years and years earlier, because that property owner completely forgot about it. Now, I would never buy a big steel sign under those conditions, because you could buy that thing and the next day they could cancel and use the 30-day option. But sometimes when you're looking at old wooden billboards out in a field, like an old Stuckey's sign or some abandoned sign, then even if they were to say, "Wait a minute, this lease expired 19 years ago, take it down," well, you're not out very much money. And on top of that, they can't get a sign put back, because it's probably grandfathered. So more than likely, they'll cut a new deal with you. So even in those cases, you'll probably come out fine. But I would urge you, on any ground lease that you ever sign, make sure that you have fully prepared for what happens at the end. Inserting just that little tiny bit of verbiage for what happens at the end of the lease is absolutely critical. And I know you'll say, "Well, but I don't really want to get an attorney involved, they're expensive." Look, I don't care if you use AI to write it, just don't have the lease come to a cold, hard ending date. It's not good for you. It's really not good for the property owner either, probably. So just make sure that there is no final expiration, that when that does occur, it simply rolls into some format where the lease keeps running forever. This is Frank Rolfe, the Billboard Mastery Podcast. Hope you enjoyed this. Talk to you again soon.