Taking Technology Opportunities to the Roof — and Protecting Them

By Jeff Bennett

I was driving down I-5 last week when my car phone rang. My voice actuated the conversation from a small headset, which the salesman told me would someday save my life. A prospective client who found my name from our TJ&S website asked whether his wife should be a party to a new lease, just in case he was killed by a bus. He quickly added that he had downloaded a commercial lease from the Internet, and that this form didn't seem to address how to handle this issue. Of course, he didn't want me to review the lease; he just wanted a short answer to a short question.

At this point I had not uttered a word except "hello." I was three minutes into the call, did not know the "client's" name, knew nothing about his business or the manner in which the lease played a part in it, did not know where he was from and had no idea of the stability of his marriage. But, he wanted an answer now.

Isn't technology great?

Telecommunication Technology Presents Real Estate Opportunities

A recent article by Robert MacDonald of the National Real Estate Investor observes that "[t]he telephone is more than 100 years old; the Internet less than 10. Last year, the Internet surpassed the telephone as a communications channel when 3 billion messages were sent each day." The technology and information age into which we have been thrust presents a wealth of opportunity for everyone. One of them affects the commercial and industrial real estate industry in what I call "telecommunication pathways." These include the roof (where satellites and antennae may be located to accommodate wireless communication), the building communication wiring systems (which provide access to voice, data and cable TV), and underground conduits (which permit telecommunication service providers (TSP's) to connect their wires in the public right-of-way to the building itself). The telecommunication pathways are of critical importance to the building owner for two primary reasons.

First, they provide an additional source of revenue at low additional cost. This is especially true for the rooftop. The demand for wireless communication is growing exponentially every day to accommodate demands for personal communication services, wireless cable and wireless Internet access. As the demand grows so does the marketplace of service providers. As the provider marketplace grows, so does the demand for sites (now primarily rooftops) to serve as platforms for wireless transmission. These new "exterior tenants" provide a previously untapped market for existing unleased space.

Other sources of revenue include the ability to lease or sell conduit and inside wires to the TSP. Installation of conduit from the street to the building can be a costly project if not completed during initial building or infrastructure construction. A TSP will normally pay for use of such conduit just to gain access to the building. Current regulations also permit building owners to own the telecommunication wiring inside the building (connecting a leased premises to the building point of entry). In turn the owner can then charge the TSP for use of those lines.

Second, buildings and projects that provide a wide range of immediately available communication options have a competitive advantage over those that do not. The options include, for example, tenant choice of a TSP, dedicated space and routes for TSP connections from the building point of entry to tenant space, and common or private video-conferencing capabilities. To provide these choices, the building owner needs to have the necessary infrastructure in place in order to accommodate quick service delivery. Soon, these capabilities will become tenant requirements, with the effect that buildings and projects without them will be unable to compete for the best tenants.

Of course, these opportunities present risks and challenges that require the building owner to protect itself.

How Building Owners and Managers Address Telecommunications Risks

To the extent a tenant is permitted to use building space for installation of telecommunications equipment or apparatus, special lease provisions should address issues such as (i) access to the roof, telephone room and building chases, (ii) installation and removal of wiring, hardware, ductwork and antennas, (iii) effect of interference with building telecommunications systems, (iv) ongoing inspection and maintenance responsibilities related to roof-mounted equipment and facilities, and (v) payment of access fees. If an antenna is proposed, an inventory of equipment and their technical specifications should be reflected in the lease so as to restrict the scope of use and its effect on other owner-provided and tenant facilities.

Finally, a TSP should be treated on the same or similar terms as a regular tenant. After all, once a TSP brings service to a tenant, it will have access to, and equipment and other personal property in, the building. The most common form of agreement for this relationship is a license. The agreement should address issues such as: (i) the scope of the TSP's rights to use of the building, e.g., access to the equipment room, installation of electronic equipment and wiring in specific locations, (ii) compensation to the owner, (iii) owner reservation to install and charge for a central or decentralized building telecommunication systems, (iv) no exclusive rights to service the building, (v) construction and installation protocol, (vi) insurance obligations, (vii) repair of damage to the building, building systems or other tenant communication equipment and facilities, (viii) no impact on other telecommunication service providers, including the owner or its contractors, (ix) indemnity and (x) termination rights.

Technology is changing the way we do business and will continue to do so for a period that has no end in sight. If you are a building owner or manager, make sure that the opportunities technology presents, and the consequences or impacts it may create, are addressed in contacts, licenses or leases in such a way that protects the risks attendant to the opportunity.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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