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Billboard Leases
12 Handy Tips
the Sign Companies
Don't Want You to Know
1. Billboard companies want to pay
as little money as possible for billboard leases. This may appear obvious,
but many landowners don't know it.
2. Billboard leases are very negotiable.
There is no such thing as a standard lease that everyone automatically
signs. Nor does everyone get the same amount of money.
3. Billboard leases can pay between
5 and 90 percent of the sign's advertising revenue to the landowner
(although anything close to 90 percent is very rare). How much you get
for your lease will depend, at least in part, on the desirability of
your location and how knowledgeable you are during the negotiations.
4. Billboard leases should be for
one or two years (then renewed subject to review). Some billboard companies
try to get landowners to sign leases 5, 10, or even 20 years in length.
Such leases can be good for the billboard companies, but not necessarily
for the billboard landowners. It is possible that the poorer the terms
are for the landowner, the longer the sign company will want the billboard
lease to be. If you sign a long term lease, you must be absolutely certain
it is in your best interests.
5. You have significant (but not
unlimited) negotiating power. If your land is zoned for billboards,
you are very special and fortunate. The busier the road or highway is
(and thus the higher the traffic count), the more valuable your location
generally is.
6. Some billboard leases pay a guaranteed
amount based on a percentage of the sign's advertising revenue. That
means the landowner shares in revenue growth as advertising rates increase.
A reasonable goal is to get between 30 and 50 percent of the sign's
revenue. A current advertising rate card from the billboard company
will be necessary. Annual lease rate increases should be tied to advertising
rate increases, not inflation.
7. If your billboard lease is for
a renewal of an existing sign, don't assume you've been getting a fair
rate and simply extend the agreement for a small percentage increase.
This is a common, and often expensive, mistake.
8. Some billboard leases pay a fixed
dollar amount without any point of reference. This may not be in your
best interests. For example, a billboard lease that pays the landowner
$500 per month may sound attractive at first. But if a two-sided sign
rents to two advertisers for $4000 per month ($2000 per face), the $500
is revealed to be only 12.5 percent of revenue. If the landowner had
linked the lease payments to the sign's advertising revenue, he or she
may have received $1200 to $2000 per month (30 to 50 percent). Over
10 years, that's a difference of up to $180,000 that could have gone
to the landowner. The lesson? Find out what the sign will cost advertisers,
and establish the unit's annual gross revenue (be sure to count both
sides of the sign if it has two faces). Negotiate from that figure,
and assume the sign will have a 100 percent occupancy for the year.
If the billboard company fails to sell the space for a month or two,
you should still get paid in full. In fact, you can request to be paid
in advance for the entire year. Some billboard leases do that (but you
have to ask for it).
9. Do not necessarily delegate billboard
lease negotiations to an attorney. Even if an attorney has experience
in real estate contracts, he or she may not know what constitutes a
fair billboard lease. However, if there is enough money involved to
justify an attorney's hourly fee, consider having an attorney review
the billboard lease before you sign it. Having your attorney read this
website might be a good idea, too.
10. The sign company employee you
negotiate with may have a bonus plan (directly or indirectly) that rewards
him (or her) for keeping your billboard lease as low as possible.
11. Try to get your billboard lease
to include a cancellation clause which allows you (but not them) to
end the contract with 60 or 90-days' written notice. Billboard companies
do not like cancellation clauses (in fact, they may say all their leases
are non-cancelable), but such clauses have indeed been included in billboard
leases. You may not get it, but you should try. Your chances of getting
a cancellation clause are better if it is a lease renewal. Initial leases
for new signs need to be at least a few years long (and non-cancelable)
in order to justify the billboard company's construction expenses.
12. Meet with several other billboard
landowners at the same time. Discuss this website, and compare your
leases. If you're not getting as much money as you should be, consider
working together and negotiating as a group. You can split legal costs
(if any), and you will have more clout with the billboard company. The
larger your group, the better. (This is, by the way, the last thing
a billboard company wants you to do, which is all the more reason to
do it.)
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