Australia: How is telecommunications leasing different from any other type of commercial leasing? Part two.

Last Updated: 17 September 2019
Article by Lauren Milne

Carrying on from Part One of my article titled: How is telecommunications leasing different to any other type of commercial leasing? I will now delve a layer deeper into the world of telecommunications leasing.

To lease a space for a telecommunications facility, carriers usually only require a lease over part of an owner's land or building rather than leasing the whole of a lot or the whole of a building.

As discussed in part 1 of this series, a number of different types of facilities exist including monopoles, rooftops, small cells and IBC's to name a few, each with different location requirements.

A mobile phone base station compound site which would include a monopole, base and shelter for 1 carrier, will usually consist of a fenced off area around 8 m x 6 m.

A rooftop site may include a leased area for an equipment cabin, then licensed areas on the corners or other locations on the rooftop for the panel antenna locations.

A small cell is typically a set of small antennas, serviced by a small equipment housing on a pole, such as a light pole, or on the ground near the pole, usually less than 1 m2 in size.

An In-Building Cellular Enhancement System ("IBC") usually installed in conjunction with a Distributed Antenna System ("DAS") is a facility that allows us to have network coverage within a building such as a shopping centre, hospital, university or multistory office building. Cabling and antennae hubs are installed throughout the ceilings of each floor and connect to a communications room, usually on the ground level of the building.

These facilities are installed to improve coverage and increase the capacity of a network within the types of buildings listed above or within a sporting arena where there is likely to be a higher concentration of network users in the one location. Additionally, our mobile phones can become confused if there are too many available facilities casting out transmission signals in the one area. These IBC and DAS facilities are designed to be the primary service a mobile phone will select to receive transmission from within the building and drown out the other surrounding and available facilities.

Due to the nature of the service that carriers are providing, they often have very specific terms they require within their leases that are not common in other types of commercial leases.

Often landlords and their lawyers treat these provisions with suspicion and look at them as if the carrier (who is often a much larger corporation than the landlord) may be trying to throw its weight around and take advantage of the little guy.

From experience, once the practicalities of running a successful telecommunications network are understood, it becomes evident that having power over others is not the motivation behind the commercial and legal provisions within a carrier's lease document. I'm going to look into some of the common provisions that can often cause confusion and provide some background as to their existence.

Hold the Phone!

A holding over provision in a lease allows for the tenant to remain in occupation of the premises after the expiry of the lease term with the implied or express consent of the landlord, normally on a month to month basis determinable by either party on a month's notice.

A carrier will however require (especially for high impact sites e.g. a compound site with a monopole) the ability to hold over for preferably 18 months, with 12 months often the absolute minimum.

Some may think of this position as excessive. One month pushed out to 18 months? That is quite a leap! However, practically speaking, it is not long at all to locate a new suitable site, come to a commercial, then legal agreement with the owner of the land, erect the new facility (which can often involve road closures and the use of large heavy equipment such as cranes), testing of the technology installed at the facility, rectification of any defects in the technology, then the switching on of that site while simultaneously turning off and decommissioning the facility at the terminated site.

At times I have experienced landlords who feel as if the carriers are taking them for a ride and trying to push out the holding over period "just because". This simply is not the case.

For the reasons explained in Part 1 of my article, a carrier cannot simply switch off a telecommunications facility and take its time erecting the replacement site. If one site is down, it seriously impacts the network and affects all customers who require coverage within the area in which the facility is located.

The impact on the carrier's business, their customers and their customers' businesses would be significant and severely detrimental.

Communication Breakdown!

Another point of contention often surrounds the carriers request to have the ability to access their site 24/7. Especially when they require access after hours to a facility located at secure site such as an office building. Again, this comes down to the importance of having a reliable network at all times.

The media widely reports when a carrier has part of their network "go down" and the inconvenience this causes for thousands of users. What would happen if you were the customer and you rang the carrier because you couldn't make or receive calls and they said, "Sorry, we are required to give 24 or 48 hours' notice to the landlord to access the building where our equipment is housed to do urgent rectification works. So unfortunately you won't have coverage for the next couple of days until we are able to fix whatever has gone wrong..."

We would all be up in arms! People would be roaming the streets unsure of how they are to live their lives without access to the world they so heavily rely on nowadays – access to their mobile phone and more importantly to the network that allows their mobile phones to function.

When a carrier is asking for 24/7 access to a site, it is not because they want the freedom for their contractors to have the flexibility to do maintenance work after having dinner with their family. It is purely so that if some emergency breakdown occurs, it can be fixed with minimal interruption to the network. Obviously security access protocols would need to be put in place for access to a secure premises and this is always readily agreed to by the carriers.

So Sue Me!

The next issue that often comes up is insurance. A landlord often seeks to have a carrier take out an insurance policy that specifically notes the landlord on that policy.

Carriers will have an insurance policy such as a global insurance policy that covers each and every site within their portfolio for certain losses. Each site has the same level of insurance cover. This site over here has no less coverage than that site over there. All parties that the carrier undertakes to insure for a particular site (as outlined in their lease) is protected under the carrier's global insurance policy.

The idea of a carrier being required to take out individual insurance policies for thousands of sites, is simply not viable and is unnecessary when the landlord is getting no less cover from a global insurance policy.

It's Nice to Share

The right to assign or sub-let is a big issue. Usually in commercial leasing, a tenant is required to seek the consent of a landlord prior to assigning the lease or sub-letting the premises.

This is another situation where, due to the size of the portfolio, it is not viable to seek the consent of all or even a portion of landlords to assign leases withina carrier's portfolio.

The most common situation where a carrier would assign part or all of its portfolio is where it is selling all or part of its network or due to the reorganisation of its business where it wishes to transfer its assets over to a related body corporate.

The administrative nightmare of seeking consent from thousands of landlords is simply not a viable option for any company with such a large portfolio.

Sub-letting or site sharing is another requirement that causes a lot of pushback from landlords.

The Telecommunications Act 1997 requires carriers to co-operate with one another and share their facilities wherever possible. This is to ensure that there is not an unnecessarily large number of facilities scattered around our country when the number required to support all of the carriers networks could be a lot less and used in a more effective manner.

Due to this obligation, often carriers will require the ability to share the space within their premises without consent. Again, it comes down to the viability of being required to seek consent on a large scale. While it is usual in commercial leasing that a tenant seeks the consent of the landlord to sub-let, carriers hold the position that it is reasonable that they are not required to seek the consent due to:

  1. the frequency in which carriers are required to share sites;
  2. the requirement to share sites being imposed by legislation;
  3. the fees they charge each other to share are usually minimal; and
  4. ultimately, the lead carrier who is sub-letting its premises remains liable to the landlord.

If we look at this closer, the likelihood of a corporation other than a carrier or another type of communications company sharing the space within the premises is close to zero.

A landlord may be concerned with who will have use and access to the land. Whilst this is a reasonable concern, landlords do not need to be worried that the carrier's premises will be the scene of wild parties or unruly tenants. The area they lease is minimal and would only be large enough to house a small amount of the shared carrier's equipment. Due to the nature of the facilities, there is not much use on the infrastructure contained within the premises other than by another telecommunications or communications company.

Some landlords feel that they are getting cheated out of rent and that the carrier sub-letting their premises is making an income out of sharing the space when the landlord could be collecting additional rent.

There are two points to note here. Firstly, as carriers are obliged by law to co-operate with each other and share their infrastructure, what they charge each other is usually minimal.

The carriers only take a lease of an area large enough to house their equipment and infrastructure. In the case of a monopole site, the area of land leased would be large enough to house an equipment cabin and monopole.

If the carrier is going to share its site with another carrier, the incoming carrier are likely to want to locate their equipment on the existing monopole, however would only seek to put their equipment in the equipment cabin already located within the premises if there is a situation where space on the land is limited. Carriers prefer to have their own shelter for these types of facilities and practically speaking there is unlikely to be any space in the existing equipment cabin to house the other carrier's equipment.

Generally speaking, the landlord would likely be approached by the incoming carrier and they would seek to lease an area of land separately to the lead carrier to erect their cabin, however still share space on the monopole with the lead carrier.

The main point that should be noted here is that sharing of sites is not looked at by the carriers as a money-making exercise to charge high rents to another carrier and dupe the landlord out of receiving an income from its land. It is viewed as a necessity. A way to minimise the impact they are having on the environment by keeping the number of facilities and amount of equipment to a minimum.

Stay tuned for Part 3 of my Telecommunications Series where I highlight more variations to usual commercial leasing positions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.

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