The telecommunications tower industry is relatively young, and its lease documents have changed considerably as it has matured. Some agreements from the late 1980s and early 1990s said little more than that a company could build and maintain a tower on the property.
Those early agreements may still govern tower sites today. When a portfolio is acquired or used in a securitization, gaps in the original documents can leave lenders and title insurers with questions about the property interests involved.
Tower Title regularly encounters these older leases during portfolio reviews. Its team identifies missing site descriptions and gaps in ownership records, then determines what additional work is needed to become comfortable with the title and the interest to be insured.
Early leases were far less consistent
In one case handled by Josh Davey, Commercial Title Counsel at Tower Title, a portfolio included cell towers built under leases from the late 1980s and early 1990s. Although the leases involved the same telecommunications company and were recorded in the same state and county, the documents differed significantly.
Some identified the approximate size of the area leased for the tower. Others said only that the property would be used to build and maintain a cell tower, without specifying where the tower would sit on the larger property.
Tower Title’s review revealed a problem for the title and lending process: the documents did not clearly identify the property interest that would serve as collateral. Additional work was needed to establish the location and extent of the client’s leasehold interest.
A lender needs to understand the collateral securing its loan. Tower Title and its insurance underwriters also need enough detail to identify the interest being insured and assess potentially conflicting claims. Without that information, a lender may be unwilling to accept the interest as collateral.
Decades of changes can compound the problem
The leases also lacked provisions addressing assignments, subleases, mortgages, and later property transfers. Several of those events had occurred since the agreements were signed, leaving questions that the original documents could not answer.
Tower Title’s review had to go beyond locating the leased area. Additional research was needed to establish how the client acquired its interest in each property and connect the original agreements to the company presenting the assets for financing.
These questions can become more complicated in a portfolio transaction. A missing description at one site may be manageable, but similar gaps across a large group of sites can affect the timetable and mortgageability, if not attended to proactively.
Creating a record lenders can use
Addressing the gaps required survey work to identify the tower locations and the client’s leasehold interests. A surveyor prepared legal descriptions establishing the precise areas covered by the leases.
Those descriptions helped the lender identify its collateral and gave Tower Title more precise information for evaluating the title. Establishing the client’s recorded interest also required documentation showing how it acquired the leasehold interests.
The additional diligence took time and increased the expense of preparing the portfolio for the transaction. But the work filled the gaps that had kept the parties from clearly identifying the client’s property interests.
Tower Title’s experience with older tower leases helps its team recognize these problems and determine what is needed to address them. Reviewing the documents early lets Tower Title spot questions about where a site sits and who holds the lease. That gives the parties time to gather what lenders and title underwriters need before closing.