12 handy tips about billboard leases

(billboard lease information 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.)

Do you need more help?

If you have questions, or would like to hire someone to help guide you through your lease negotiation, contact Jeff Thomas at jthomas @ UnitedLandowners.com.

Copyright 2003 National Landowner Network, LLC.