Cell Towers at Churches

Risk vs. Reward

If you’re like most churches, your primary concern is the amount of monthly income you will receive in rent. In short, are cell towers worth the risk? There is no easy answer, as monthly rental rates that work for one church may not be sufficient for another. We have seen monthly rental rates ranging from $1,000 to $2,500, with rumors of more. In some cases, there is also a signing bonus just to encourage the lease.

You may also consider permitting cell towers to share (co-locate) additional cell carriers on the same tower in exchange for an increase in rent. This way, all parties to the primary lease benefit from an additional carrier at the location. However, some cities require that cell towers allow co-location of other carriers as a way to minimize the number of towers built. In those instances, most providers will not agree to an increase in rent for co-location, and the only resolution for a property owner is to limit the square footage leased for the equipment, so an additional carrier would have to rent land separately.

Even with careful negotiations and contract revisions, cell towers require city approval before construction can begin. Since cell tower companies generally won’t pay rental fees until permits are issued, all the effort may be wasted if the tower is never approved. Obtaining approval may be easier on church property because of zoning, but a variance or other request is often still necessary, which means public hearings and neighborhood notice.

Additional Considerations

During the public hearing process, many neighbors will raise fears that towers pose health risks. However, provided the proposed cell tower falls within guidelines set by the Federal Communications Commission, such arguments generally will not carry legal weight. Neighbors may also argue that the tower will hurt property values or appearance, but cell towers on churches are usually disguised, and most home buyers are not deterred by a nearby, well-concealed installation.

Utilities should never be included in the monthly rental rate. At a minimum, the cell provider should install a sub-meter that records the tower’s electricity usage. Even if reimbursement takes a few months to sort out, the church shouldn’t end up quietly subsidizing the carrier’s power bill.

An often-overlooked issue is the easement created by the lease. The cell provider will require 24/7 access to their equipment, plus space for a diesel generator in case of a power outage. If the easement terminates with the lease, that’s manageable, but a leaking generator can cause real environmental damage, and these easements are often long-term or permanent, potentially limiting the church’s future use of that area. Make sure any easement granted does not, by itself, generate separate income obligations for the church.

Cell tower leases are always negotiable, so don’t accept the initial offer. When a cell provider or their agent reaches out, let them know your church will be represented by legal counsel and that you expect them to reimburse that cost.

Cell Tower Deal Breakers

Most cell tower leases include a clause making the property owner responsible for all property taxes. For a standard commercial property owned by a for-profit entity, that’s rarely an issue. But for a religious organization that benefits from a property tax exemption, this can become a real problem if the exemption, or a portion of it, is lost as a result of the lease. A lost exemption can mean thousands of dollars owed for the period the tower was on the property, and potentially beyond, until it’s legally removed.

Most cell tower providers will also want a first right of refusal to purchase the property if the church ever decides to sell or transfer title. That right can hurt marketability, since a good-faith third-party buyer has to invest time negotiating a deal that may never close if the tenant exercises its right. Some buyers, wary of cell tower health concerns generally, will simply pass on the purchase altogether.

Mechanic’s liens are another risk. If a worker, subcontractor, or laborer isn’t paid for work performed on the property, the church can still end up owing the amount of the lien, even if the prime contractor was paid in full. Short of suing the prime contractor, most unpaid parties will file a lien against the property. That lien is a hold against the real property that, if unpaid, can lead to a foreclosure action forcing a sale, and it’s recorded with the County Recorder’s office by whoever went unpaid.

The church may also owe income tax as a result of unrelated business income, defined as income from an activity that is (1) carried on to produce income from selling goods or performing services, (2) not regularly carried on by the organization, and (3) not substantially related to the organization’s exempt purpose. There are exemptions to this general rule for cell towers on church property, discussed further in a related article, but the most important factor in determining tax owed is generally whether the church property is debt-financed. See the IRS overview of Unrelated Business Income Tax for more detail.

Also worth considering: what happens to the infrastructure installed to support the tower once the lease ends? Most providers will only agree to remove what they installed above ground. Without proper negotiation upfront, concrete footings, underground conduit, and electrical work can remain behind indefinitely, left for the church to deal with in ways it never anticipated.

The average cell provider will also want an initial 5-year lease with five additional 5-year extensions, meaning that short of the tower becoming unprofitable, the church is effectively committed for up to 30 years. Most leases are written so that only the provider, not the property owner, can terminate. Make sure any deal the church signs includes an electrical sub-meter, so the church isn’t paying more for electricity than it earns in monthly rent.

Lease Buyouts

Once a lease is in place and the tower is operational, expect calls from third-party leasing agencies offering to buy out your agreement with the cell provider. These companies review the lease and offer a flat fee for the remaining term, typically around half of the remaining rental income the church would otherwise receive over the life of the lease. In exchange, the church gives up complete control over that portion of the property, leaving it to a third party to manage and operate with no further say from the church.

In conclusion, the church should read the fine print carefully and make sure the lease preserves its ability to renovate or expand church property without limitation. As a church council or board member, there is a duty to be a good steward of church property and resources, in order to provide sustainability into the future. Church properties are highly sought after by cellular providers because of their zoning, proximity to residential areas, and the fact that most churches lack the specialized knowledge needed for these negotiations.

Related Articles

How Zoning Codes Effect Churches
Churches and Property Tax Exemptions
Preventing Mechanic Liens
First Right of Refusal

Disclaimer: Every situation is different and particular facts may vary, thereby changing or altering a possible course of action or conclusion. The information contained herein is intended to be general in nature, as laws vary between federal, state, counties, and municipalities and therefore may not apply to any given matter. This information is not intended to be legal advice or relied upon as a legal opinion, course of action, accounting, tax, or other professional service. You should consult the proper legal or professional advisor knowledgeable in the area that pertains to your particular situation.