Water Company Retains Kreines & Kreines, Inc. to Propose Rent Increases on Upgrades at Water Tank Cell Sites 

A major public water agency, with over 200 cell sites on its water tanks, has asked Kreines & Kreines, Inc. to prepare a manual for identifying and addressing cell site upgrades.  The problem of continuous upgrading is universal, on water tanks and rooftops as well as towers:

·         Wireless carriers lease positions on water tanks and on the ground for limited capacity cell sites.

·         Over time, the cell site has expanded in a number of ways:

-   The equipment is “enhanced.”

-   The number of antennas may increase.

-   The number of cables may increase.

·         The floor area space may not increase substantially, or at all, but the capability of the site and its power output are increased dramatically.

All of this occurs in the name of “upgrades,” an activity that every enterprise, public or private, is entitled to engage in.  Water works agencies can be frustrated, however, when the value of a leasehold multiplies but the value of the lease is limited to a 3% yearly cost-of-living increase.

A New Lease May be Needed

Kreines & Kreines, Inc. begins by looking at our water agency client’s standard form lease.  Over the last decade-and-one-half, the standard lease has been improved from its wireless carrier-provided beginnings. But the wireless lease still suffered from its basic shortcomings:

·         The standard form of lease was basically a real estate lease, basing lease rates on square footages, which don’t tend to increase with “upgrades.”

·         Changes or additions to equipment are not proportionally addressed, e.g., when upgrades occur, rent is not increased proportionally, if at all.

Kreines & Kreines, Inc. takes the position that wireless leases are not simply real estate leases: they allow the transmission and reception of signals, and that capability can be measured.

Kreines & Kreines, Inc. proposes a new type of lease that bases lease rates on changes … call them “upgrades” or call them “enhancements.” Kreines & Kreines, Inc. calls them modifications and, under the old lease, they improve the value of the leasehold to the wireless carrier, but not to the landlord.

The new lease depends on several exhibits:

·         The old lease’s small-scale drawing of the entire water tank area does not allow for the detection of changes or “modifications.”

·         For some landlords, the lease exhibits are lost or marginalized.

·         Detailed, large-scale exhibits show the baseline, or starting condition and, when compared to the new or proposed condition, readily show the modifications.

A new lease has to allow two things to happen, and a manual spells these out.

Identification of a Modification

Sometimes an upgrade or an enhancement is not obvious.  Landlords rely upon the tenant to ask permission but the request for permission is not always made.  So, what difference do a few more cables make?

The key is to quantify a modification.  Is it an upgrade, adding substantial value?  Or is it a simple enhancement, adding some value?  Most important, how can our client ask for a proportional rent increase based on the degree of the modification?  That would all be spelled out in a new lease and a manual shows the client how to do it.

Addressing Upgrades and Enhancements Before They Occur

A lease is a contract and the parties should be partners rather than adversaries. Instead of investigating a change after the fact, a manual shows a landlord how to structure a lease that anticipates modifications rather than reacting to them.

Upgrades and enhancements are a fact of life in wireless technology and, as the other articles in this issue point out, more modifications are coming and they will occur more frequently.  Water engineers are fussy, particularly when more weight gets added to a water tank.  So our client came to us and asked for lease language that clearly allows for lease amendments when upgrades or enhancements are contemplated by the carrier.

What This Means to You

Whether you have water tanks or rooftops on your property, the wireless carriers are either already there or about to pay you a call.  In either case, let Kreines & Kreines, Inc. see the lease and we will tell you what’s wrong with it (or what’s good about it).

Frequently, a staff person will obligingly allow a carrier to do whatever is verbally asked for by a carrier.  Everyone needs to see the manual in order to understand:

·         An upgrade or an enhancement is a landlord’s rent increase on the table.

·         Don’t just leave it there … negotiate it.

·         Small monthly increases in rent add up to hundreds of thousands of dollars over the life of a lease.

Kreines & Kreines, Inc. engages its clients at a very small cost to analyze their lease.  For less than what a rent increase may bring you in one year, Kreines & Kreines, Inc. will prepare a manual for you.  Your manual will be different than anyone else’s, since it is based on an analysis of your lease.

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Kreines & Kreines, Inc.
58 Paseo Mirasol, Tiburon, CA 94920
Phone: (415) 435-9214
Fax: (415) 435-1522
e-mail: mail@planwireless.com