|Welcome to the first edition of Activated for 2016.
We trust you had a restful end to 2015.
Andrew and I look forward to working with you all again this year.
What to Consider When Leasing Common Property To Telcos
Telecoms carriers frequently ask bodies corporate to agree to lease part of their common property (usually part of the building’s roof) to the carrier for installing mobile telecoms equipment. More recently, this has started to occur with ultra-fast fibre optic connections. But how do you help to ensure your body corporate gets a reasonable deal?
In this article we outline which key lease terms your body corporate can and can’t negotiate with a carrier.
We also talk about the levels of owner approval required for various leases, and a possible unexpected tax consequence for lot owners when the body corporate receives rent from a lease of the common property.
Our previous article [Telco Tales – Part 1] looked at why a body corporate might be better off by negotiating a lease rather than settling for compensation from a carrier who installs their equipment on part of the common property.
In this second article we outline some of the key items the body corporate should consider when negotiating with a carrier for a lease of part of the common property.
Many carriers prefer to formalise their land access arrangement under a lease, and they have developed standard terms which they try to use across their hundreds of equipment locations in each State or Territory.
As you would expect, these terms written by the carrier’s lawyers favour the carrier. But despite being couched as “standard” terms, the carrier may be willing to flex on some of the commercial and legal points depending on how important the scheme’s location is in the carrier’s network plans.
What terms should you ask for or require from the carrier?
In our experience most carriers are willing (more or less) to negotiate on:
- Annual rent amount and rent reviews.
- Term or length of access — this is often an initial term plus an option period, or perhaps 2-3 consecutive terms of 7-10 years each. In Queensland, a single lease of more than 10 years would create a deemed subdivision of the common property — and a “piggyback” arrangement of shorter leases might be appropriate.
- Area to be leased — To avoid a possible dispute, it is important this area be precisely identified using diagrams and plans. Usually the carrier will prepare detailed drawings of its individual equipment locations and wiring paths, and these need to be included in the lease.
- Access and supervision — The leased area will often include part of a roof or upper floor, and you may need to establish an access procedure if yours is a secure building.
- Electricity supply — Some carriers prefer to install their own electricity supply and metering, while others may want to access to the body corporate’s bulk scheme. Whatever the arrangement, it is important to agree the electricity supply, metering and billing arrangements up-front in order to avoid disputes and significant financial risk to the body corporate.
- Contribution to costs — The carrier may agree to pay for or contribute to the body corporate’s legal costs and general meeting costs for voting on the proposed lease. This should apply regardless of whether a lease is ultimately approved by the owners.
- Costs of repairs or capital works — The carrier may also agree to pay for or contribute to the body corporate’s costs of something your building has wanted to add, change or fix for some time. It doesn’t hurt to ask! But keep in mind the body corporate has a statutory obligation to maintain its common property, and it would be unreasonable to insist the carrier to pay for something that is a body corporate obligation.
A carrier may be less willing to negotiate on:
- Warranties and indemnities for legal and financial risks, and their insurance clauses — But with that said, there are some crucial clauses which the body corporate should insist on. Your lawyer can advise you about provisions which are appropriate to your scheme.
- Assignment, subletting and “co-location” — In general, these are rights the carrier will insist on, to ensure it (or its successor) can continue to use the premises if the carrier restructures or sells its business, or needs to share the premises with another licensed carrier.
- Make-good at the end of the lease — the carrier will usually agree to remove its equipment and repair/reinstate the lease area when the lease ends, but do not expect them to install a new high-spec fitout where one didn’t exist before.
In short, even if a carrier wants you to sign their standard terms document, they may be willing to negotiate a better deal for your owners. Don’t be afraid to ask!
What if the lot owners refuse to come to the table, or ask for unreasonable terms?
Owners and committees must recognise the carriers wield a big stick: A statutory right of access to install certain “low impact” facilities. If your site is crucial to a carrier’s network plans and if your owners refuses or try to push the deal too far, the carrier might apply for a court order to enforce its statutory rights. And if they get that order, the body corporate might be able to claim only statutory compensation for actual damages, rather than receiving a higher amount of rent in each year of a lease.
The lot owners will need to approve the body corporate’s entry into any lease of the common property. In Queensland a lease of common property for more than 10 years under the Accommodation Module (or 3 years under the Standard Module) requires a resolution without dissent. For a shorter term, the authorisation must be by special resolution.
Telco Tales provides practical guidance for committees and BCMs dealing with telecoms carriers about installing networking sites or fibre optic connections on the common property.