What Is A Billboard Lease Agreement?
The billboard lease agreement is a lease in the sense that it typically includes a specific term and expiration date. The billboard lease agreement is also an easement for access purposes. There are two other facets of the billboard lease agreement – the parties involved and the subjects covered by the agreement. The parties to a billboard lease agreement typically consist of the lessor (i.e., the property owner) on one side and the lessee (i.e. , the sign company) on the other side. The billboard sign company may actually be a third party, as the lessor might grant the lease to a developer or real estate company rather than directly to the sign company. In addition to the parties, the Billboard Lease Agreement will commonly address easements for access and utilities, shared maintenance responsibilities, aesthetic guidelines for the sign and the land surrounding the sign, and rent amounts and payment schedules.
Common Terms In A Billboard Lease Agreement
Many types of agreements relating to the lease of property exist today. This includes a lease for a billboard. A billboard lease agreement involves a property owner and a billboard company. These two entities have an agreement about the placement of an advertisement on a billboard owned by the billboard company as well as the site location. This takes place in exchange for lease payments made to the property owner. This can be attractive for some property owners as it literally brings in a new stream of income. If the property owner owns a space that is not being rented or has been difficult to rent, then leasing a billboard on the premises may be considered. Here is a look at some of the key terms and conditions typically included in these billboard lease contracts.
Term – The exact period of time for the lease or renewal periods. It may also set forth a right to end the agreement early with notice given.
Usage of the Lease Space – A description of the lease area as well as any signs that may be erected. This will also include use of access roads as well as common areas.
Installations – The ability to install and maintain the sign which is deemed to be the property of the billboard company
Rent – This is the lease payment and how often it will be paid, due date, etc. It may also include the possibility of additional consideration such as the percentage of revenue. Monthly, quarterly or annual rent may be outlined.
Taxes – Who is responsible for paying the sign taxes as well as the location taxes.
Additional Rental Consideration – May include percentage rent, additional signage requirements, reimbursement for work related to the sign or the lease space.
Default – That either party should have notice and the opportunity to cure any event of default or reasonable opportunity to cure.
Owner Approval – Owner must consent to any subletting or assignment
Indemnification – General indemnification which obligates the operator to indemnify or hold harmless the property owner. This may also include a requirement to name the property owner as an additional insured or add them to the policy.
Benefits Of Leasing A Billboard Structure
The decision to invest in billboard space can provide valuable benefits for businesses or individuals looking to enhance their marketing efforts. Leasing a billboard space offers a level of exposure that is difficult to achieve through other marketing channels. The physical presence of the billboard in the real world means that it can capture the attention of a wide audience and create lasting impressions through repeated views.
A key advantage to leasing a billboard space is the flexibility it offers to businesses. Unlike many other forms of advertising, where contracts are typically long-term, billboard leases can vary in length, allowing for greater flexibility when it comes to adjusting marketing strategies. Depending on the advertising strategy, advertisers can choose billboard leases that are as short as 30 days or extend for several years. This flexibility in duration allows companies to adjust their advertising strategies more readily if a particular campaign is unsuccessful. For new businesses or those testing new products, this flexibility only adds to the appeal of billboard advertising.
Another significant benefit of leasing a billboard space is the ability to target specific locations that are crucial to a particular business. Billboards can be strategically placed in areas that are relevant to a business’s target audience, providing a level of geographic targeting that may not be available through other advertising mediums. A billboard in a high-traffic area, for example, can help a business reach a large audience quickly and cost-effectively.
In addition, leasing a billboard space can provide a significant return on investment. Whether a lease is short- or long-term, the visibility and potential reach of a billboard can make it a worthwhile addition to a business’s marketing portfolio. The lease may also allow for changes in location to target different markets at different periods.
The leasing of billboard space can also be a relatively low-maintenance endeavor, allowing a business to focus on other marketing and operational tasks. Unlike a digital billboard, which may require regular content updates, a physical billboard may only require the updating of printed material or digital files with new content. Even these updates can be managed by a third-party leasing company.
Overall, leasing billboard space can provide a variety of benefits for businesses of all sizes. The level of exposure, location targeting and flexibility make them an attractive option for those looking to increase their marketing efforts. When considering advertising options, investors should weigh the potential benefits of billboard leasing against the relative costs to find the solution that works best for them.
Key Legal Considerations
A billboard lease agreement is a legally binding agreement between a billboard landlord and a billboard tenant. It is important to have a good understanding of the general legal principles so that you can be prepared to comply with the terms of the agreement and protect your rights.
Zoning Requirements
Depending on the particular municipality, zoning laws may limit the type of sign that can be placed on your land. For example, zoning laws may prohibit certain types of electronic signage (for example, flashing lights, motion graphics and/or video) on your land and in your area. Your location may also be subject to specific height, size or shape limitations. It is important to have these limits explained to you – most billboard lease agreements provide that the billboard tenant is required to get all permits and approvals that are necessary for the billboard.
Other Legal Rights
Additional rights that may pertain to your billboard include the right to remove or trim trees and shrubs, right of entry/passage to the billboard site and the right to seek legal remedies for default and to terminate or renew the lease.
Guidelines for Negotiating a Billboard Lease
Negotiating a billboard lease starts with an evaluation of your overall needs and budget. Does the location of the potential sign fit your company’s needs? How much will it cost to erect the sign and erect the sign? Which company do you wish to have as the sign owner? These and other questions should be developed before entering into lease negotiations.
One you have evaluated all of your needs and budget, you should be ready to proceed with negotiations. You want to negotiate terms that are beneficial for both you and the land owner that is renting the space for the sign. The following are a few tips for negotiating a billboard rental agreement.
- Request a longer term for the lease. Billboard owners are always looking for the longest term possible. This protects their investment. But a longer term means higher short term costs.
- Seek out incentives or allowances. Often, the sign owner will offer to cover construction costs and move your sign. Often, this will be true even if the rent is temporarily increased for the first few months . Sign owners are in business to make money in the long run, not the short term.
- Agree to a rent increase schedule. Often, the land owner expects for the lease to cover a price increase in rent. If you can agree to a rent increase schedule, both you and the land owner benefit. It provides the land owner with the ability to increase the potential future revenue from the sign. Also, having a schedule allows you to plan your budget.
- Only negotiate with a direct supervisor. Often, the person that you are completing the lease agreement with is not the boss. Sign owners tend to have several billboards and sign owners. Negotiating with a direct supervisor gives you a voice that is capable of imposing decisions.
- Learn the general terms of the area before you negotiate. Gain some knowledge about the area before negotiating. This will allow you to gain a better understanding of what the land owner would be willing to compromise on, and what they would be unwilling to sign off on. This way, both you and the owner can leave happy.
Common Billboard Lease Mistakes
One of the most common pitfalls lies in the renewal period of the lease. If you have the right to renew, you must confidently exercise that right at least 30 days prior to the notice date. As the renewal period can be 30-60 days, this can be a very tight window. Failure to exercise your right to renew by the deadline can be costly. Remember, once your billboard lease expires, the landlord is free to re-rent your space to competitors. Your business could lose its spot on the billboard, which could lead to lost revenue.
Another mistake often made is the failure to negotiate the tenant improvements. Billboard landlords have notoriously been hard-nosed when it comes to negotiating. However, billboard tenants must fight for the tenant improvement fee if they desire a customized advertisement. It is essential to negotiate ahead of time if any form of customization is desired, as the billboard company will be under no obligation to fund the changes. This would leave tenants with the hefty bill and no way to advertise using their preferred design.
Negotiating an unreasonable rental rate is also a common error. However, one of the omissions to make is to fail to indentify the composition of the market-rate. Billboard tenants must find out how much comparable billboards are renting for. Furthermore, tenants should be alert to the billboard landlord’s track record of raising rent every year. If tenants see the owner raising rates consistently, i.e. every year, the company may be trying to inflate the value of its rent too quickly. This is an issue tenants should avoid at all costs.
Terminating a Billboard Lease
In most cases, a billboard lease is a long-term agreement. The practicalities of surveying and obtaining the requisite government approvals for constructing a new billboard structure usually are time-consuming and expensive undertakings. These costs typically mean that billboard leases are executed for terms of at least 5 years.
As a result, the decision to terminate a billboard lease is not a decision usually made by an advertiser without due consideration. Indeed, it is extremely likely that a billboard site does not have the ability to generate a return on the capital outlay required to construct a new billboard structure. Therefore, if this new sign structure is to be the only alternative to moving your billboard to another location, your lease usually will not be terminated unless absolutely necessary.
The most common scenario when an advertiser seeks to terminate a billboard lease is one in which a billboard site is scheduled to be reclaimed by the landowner or governmental authority in the future. For example , the sign may be located in a right-of-way to be widened by a governmental agency, or the lease may provide for an option to reclaim the site for future development of an adjacent tract.
The process for terminating a billboard lease usually involves sending a notice of termination to the landowner or landlord. The period of time required to provide the notice is governed by the applicable state laws and can also be dictated by your lease agreement.
Please keep in mind that a lease typically is not breached in order to get out of a contract you no longer desire to continue. If you allow your lease to expire by its terms, you then are free to relocate the sign. The downside is the requirement to undertake the costly survey and permitting process again. In some states, you must even wait for the expiration period set forth in your ground lease before you can move your sign. That is why serious consideration should be given to any decision to terminate a billboard lease, post-lease construction.