How Do Real Estate Taxes Work On Cell Towers?
It is very important to pay attention to the proposed tax provision in your cell tower lease. Taxes are so important that in AT&T‘s lease template they devote almost 900 words of language, just to the taxes provision. Verizon’s lease template on the other hand is about half that at approximately 450 words.
Typically the way most tax provisions work in cell tower lease agreements is in the event the property tax bill goes up due to the installation of the cell tower, the property owner pays the increased amount and then sends proof of payment of the bill and last years’ bill to be reimbursed by the tenant. The reimbursement will solely be in connection with any increased amount in taxes due to the installation of a cell tower on the property.
Beware Time Limits On Reimbursement
Some cell tower lease agreements will give the Landlord thirty days to send the tax bill to the Tenant, or the Tenant’s obligations to pay the increase are waived. Other language may give the Landlord one year to present the Landlord’s reimbursement request to Tenant. If the Landlord forgets or fails to request reimbursement during that one-year, then their obligation to pay is waived.
Watch out for this sneaky language that tries to get the cell tower tenant off the hook of paying taxes.
How Soon Should The Tenant Reimburse You?
In most cell tower lease agreements the tax provision is silent on how soon your tenant has to reimburse you. As is customary in most business exchanges, once you send your tenant an invoice requesting reimbursement, they should only need thirty days to reimburse you. It is imperative that there is a deadline placed on the tenant on how quickly they will reimburse you. If a deadline is not placed on the tenant, you may request reimbursement and your tenant can take as much time as they like to pay you back.
What Is The Ideal Tax Arrangement?
Ideally you want to have your tenant have their own direct account directly with your County Assessor. That way you do not have to play middle-man paying their real estate taxes and then getting reimbursed every year. Here is the typical language one would insert into the lease agreement.
“Tenant shall use reasonable efforts to have real estate taxes and assessments attributable to Tenant’s leasehold improvements and personal property separately assessed and billed directly to Tenant by the local tax assessor. “
It is important to note that not every County and situation will allow for this ideal setup of having a relationship directly between the tenant and the assessor.
What Is Common Real Estate Tax Language In Cell Tower Leases?
Below is language taken from the Verizon lease template.
“Except as stated herein, Landlord shall be responsible for timely payment of all real estate taxes and assessments levied upon the lands, improvements and other property of Landlord, including any such real estate taxes that may be calculated by the taxing authority using any method, including the income method. Tenant shall be responsible to pay, prior to delinquency, any taxes and assessments levied upon Tenant’s leasehold improvements and personal property on the Premises, and any real property taxes and assessments levied on the Property which are attributable to the presence or installation of the Communication Facility, if and as set forth in this Section 21.
Tenant shall pay such amount to Landlord within thirty (30) days of receipt of an invoice from Landlord (together with supporting documentation indicating the real estate tax increase due to Tenant’s installation at and/or use of the Premises). Nothing herein shall require Tenant to pay any inheritance, franchise, income, payroll, excise, privilege, rent, capital stock, stamp, documentary, estate or profit tax, or any tax of similar nature, that is or may be imposed upon Landlord.
In the event Landlord receives a notice of assessment with respect to which real estate taxes or assessments are imposed on Tenant’s leasehold improvements on the Premises, Landlord shall provide Tenant with copies of each such notice promptly upon receipt, but in no event later than three hundred sixty-five (365) days after the date of receipt of such notice of assessment by Landlord. If Landlord does not provide such notice or notices to Tenant within such time period (to the extent such real estate taxes and assessments are not separately assessed and billed directly to Tenant), Landlord shall be responsible for payment of the real estate tax or assessment set forth in the notice, and Landlord shall not have the right to reimbursement of such amount from Tenant. If Landlord provides a notice of assessment to Tenant within such time period and requests reimbursement from Tenant as set forth below, then Tenant shall reimburse Landlord for the real estate tax or assessments identified on the notice of assessment on Tenant’s leasehold improvements, which has been paid by Landlord, within thirty (30) days following receipt of such calculation. If Landlord seeks reimbursement from Tenant, Landlord shall, no later than sixty (60) days after Landlord’s payment of the real estate taxes or assessments for the assessed tax year, provide Tenant with written notice including supporting documentation and evidence that Landlord has timely paid same, and Tenant shall promptly reimburse Landlord.
For any tax amount for which Tenant is responsible under this Agreement, Tenant shall have the right to contest, in good faith, the validity or the amount thereof using such administrative, appellate or other proceedings as may be appropriate in the jurisdiction, and may defer payment of such obligations, pay same under protest, or take such other steps as Tenant may deem appropriate provided no late charge, fines, assessments or liens attach to the Property and Landlord is not prejudiced in any manner. Landlord shall cooperate with respect to the commencement and prosecution of any such proceedings and will execute any documents required therefor. The expense of any such proceedings shall be borne by Tenant and any refunds or rebates secured as a result of Tenant’s action shall belong to Tenant, to the extent the amounts were originally paid by Tenant. In the event Tenant notifies Landlord by the due date for assessment of Tenant’s intent to contest the assessment, then except as noted herein, Landlord shall not pay the assessment pending conclusion of the contest, unless required by applicable law.
If Landlord fails to pay when due any real estate taxes affecting the Property, excluding taxes payable by Tenant as stated above, Tenant will have the right, but not the obligation, to satisfy any lien or encumbrance filed against the Property and to seek reimbursement from Landlord by delivering to Landlord at least thirty (30) days prior written notice and opportunity to cure: (i) in the event of unpaid taxes, the Property is in danger of being sold and any statutory appeals period to contest the amount of taxes owed has lapsed, or (ii) in the event of any other liens or encumbrances, the Property is in danger of being sold or foreclosed upon.
Any tax-related notices due from Landlord to Tenant shall be sent to Tenant in the manner set forth in Section 17 and, in addition, of a copy of any such notices shall be sent to the following address. Promptly after the Effective Date of this Agreement, Tenant shall provide the following address to the taxing authority for the authority’s use in the event the authority needs to communicate with Tenant. In the event that Tenant’s tax addresses changes, Tenant shall be required to provide Tenant’s new tax address to the taxing authority or authorities and Landlord.
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About Nick G. Foster
Since founding Airwave Advisors® in 2014, Mr. Foster has added value to over 400 clients ranging from the State of Nevada, City of Beverly Hills, to Habitat For Humanity. Mr. Foster focuses on cell tower lease renewals, buyouts, new lease negotiation, and cell site lease management. Prior to starting Airwave Advisors® Mr. Foster founded and led the Cell Site Services Group within nationwide commercial real estate services leader Cassidy Turley (now known as Cushman & Wakefield).