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The Morton Memo - July 2012
This issue of The Morton Memo highlights two areas we added to our practice when we expanded earlier this year - estate planning and telecommunications. The two articles here concern very different subjects. The one theme they share is that individuals and entities need knowledgeable counsel. Estate plans need to be reviewed from time to time as things and people change. Cell phone tower lease negotiations are complicated. Both need the advice of a knowledgeable attorney.
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estate plan review: Never a better time
We recommend that our clients review their estate planning (trusts, wills, powers of attorney, etc.) at least every two years. Now is a great time to review estate plans for several reasons.
Make your estate plan simpler
Many trusts and wills were drafted at a time when estate taxes affected a greater number of estates. Trusts drafted in that era are often complex, particularly for married couples. Typically, when one spouse died, the trust estate would be split into two (or more) trusts that with provisions for separate, more costly administration. Today, many of those estates are no longer subject to estate taxes and therefore no longer benefit from the complexity of split trusts. Many of these trusts can be simplified, which eases the burden and costs of trust administration.
Changes in the law
Recent court decisions cast doubt on the validity of no contest clauses in wills and trusts that have been amended. A “no contest” clause provides that if the will or trust is contested by a beneficiary and the beneficiary’s contest is not validated in probate court, the beneficiary will receive nothing from the estate. This is done to prevent unnecessary litigation among heirs.
If you have amended your trust or will since 2002, you may wish to review it to be sure that a no contest clause is explicitly affirmed in the amendment. From time to time, other changes in the California estate planning and tax laws have an impact on trusts and wills, and this is particularly true if the size or character of the estate has changed substantially since it was first created.
The single most important reason to review an estate plan is that things change. Children are born. Children grow up. Children have children (amazing how kids make life complicated). People move and their objectives change.
Often our clients are surprised when they review an estate plan years after it was drafted. Someone named as agent in their general power of attorney lived nearby but has now moved out of state. Parents realize that their children, minors when their trust was drafted, are now adults who don’t need the same provisions or distribution of money. Some clients realize that they have changed their minds about a charitable bequest that wanted to make a few years ago.
Now is a good time to get out your estate plan, consider how it is structured, and be sure it reflects your current wishes. Putting it off is not a good idea (nobody is getting younger).
No cost review
We offer reviews of estate plans at no cost. Schedule an appointment to thoroughly review your trusts, wills and powers of attorney. We will recommend changes, if necessary. Some estate plans need to be completely redrafted. Others need minor tweaks. And, others need to changes at all. We also offer advice on estate governance and how to hold property.
If you would like a free estate plan review, please contact us at at firstname.lastname@example.org or (760) 722-6582.
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cell lease buyouts: five keys to success
By Michael H. Ritter
Perhaps the hottest topic today in the wireless industry is cell site lease buyouts. Cell site landlords are being offered large sums of money to assign their rights to future rents for leases of cell phone towers on their properties. Many of these landlords are of modest means, including churches.
To be offered a large sum for a buyout of future rents is very tempting. However, there are a number of dangers in agreeing to such a buyout. This article gives five keys to success in evaluating and negotiating such a buyout.
Cell site leases are long-term real estate leases whereby the landlord grants a lease and easements to the cell site tenant. The most common tenants are the large wireless carriers such as Verizon and AT&T and the large tower companies such SBA and Crown Castle. The tenant pays landlord rent monthly for a long term. The tenant uses the leased space for the installation of its facilities and connections to utilities.
Lease buyouts are structured as the purchase by a company of certain assets and pre-payment of the rent due to the landlord under the cell site lease. In return, the landlord assigns its rights to future rents. In most cases, the company making the offer is not the tenant. Offers are typically based on a multiple of the current rent paid to the landlord and may be impacted by several factors. For example, the more rent the landlord gets today means a higher buyout offer.
Landlords need to know five important facts in evaluating buyout offers.
- What’s in our lease? Understanding the details of the original lease and subsequent lease amendments is a crucial initial step to a successful lease buyout. For example, it is common that the lease has been assigned from one tenant to another. There may also be significant changes to the original lease in amendments. Collecting and carefully reviewing all documentation regarding the lease must occur before proceeding with a lease buyout.
- Is this a good financial decision? Suddenly receiving a large sum of money can certainly be a good thing. However, landlords must fully explore the impact of this in terms of accounting and taxes. In addition to these important factors, non-profit organizations such as churches must also consider the responsibility of trading an increasing revenue stream for a lump sum payment. Getting solid advice on such matters early in the process helps to fully analyze the buyout as a financial decision.
- What are we really selling? Besides the price, this is perhaps the most important factor in a lease buyout. The landlord’s rights under the original lease include the right to receive an increasing rental payment during the lease term. However, most lease buyout companies seek to acquire more than the assignment of the rent. Landlords must be concerned about unknowingly selling additional property rights and selling rent assignments beyond the original lease term. Accurately determining the assets for sale impacts the price and structure of the transaction.
- Is the price fair and reasonable? Properly calculating the value of cell site leases requires experience with negotiating and drafting such leases, expertise in contract law and real estate law, understanding of how lease buyouts work, and local knowledge about the landlord and cell site. As discussed above, perhaps the most important factor in valuing the leases is determining what is actually being sold. In arriving at a fair price, it is advisable to seek multiple bids on terms acceptable to the landlord. Using an experienced attorney or other licensed professional can also help achieve better results since they are aware of other recent transactions establishing market pricing.
- Who is the buyer? In some ways, all lease buyout companies are alike. They all want the same result and tend to deal with landlords similarly. An important initial distinction is whether the person representing the buyer is a broker. Brokers set up deals that are then passed along, for a fee, to the buyout company. It is advisable to work directly with the authorized in-house representatives of the firm buying the assets. Please note that the buyout firms are themselves intermediaries for the institutional investor funding the buyouts. However, they have direct contact with their investors and are not brokering deals. Understanding the buyout company’s history, goals, and tactics are useful tools in evaluating them. If all other aspects of a sale are equal, intangible factors may be the only differences. Landlords should work only with timely, professional and ethical buyer representatives.
Lease buyouts are typically portrayed by buyers as simple, quick and easy. Many buyer representatives are aggressive and dishonest. Some are just plain unethical. Success in negotiating and closing a cell site lease buyout requires carefully considering five key elements. Seeking professional representation pays dividends in these unique and sometime complex transactions.
Michael Ritter is an attorney with the Law Offices of Eric D. Morton. He has extensive experience in telecommunications and cell phone site leases in particular. He can be contacted at email@example.com.
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