Current Issues in Billboard Leases

Association of Construction and Development
May 13, 2013 — 3,039 views  

Nowadays, we are surrounded by billboard advertising wherever we go. Every week, an average individual is exposed to more than a thousand of these billboard ads. With the outdoor advertising industry rising in demand and becoming very competitive, it is important to be are aware of the issues involved in leasing out billboard space for various advertising purposes. Understanding the legal complications involved in billboard leases is important if you choose to run it as a business, without causing issues that could damage the organizational or financial structure of the company.

Description of Property and Its Use

Most of the billboard agreements that are seen nowadays do not specify the area of land that is being leased, but instead describe the types of signs that can be placed in a general area. The billboard leases also state that it covers the possession and use of the area for erection and maintenance of advertising displays, including other necessary structures and devices. The lease also does not limit the use of the property for billboard usage. It is necessary that clear dimensions of both the land being used, and the sign that is being erected are included in the agreement. It should also limit the usage to these specifications so that no changes can be made to the billboard structure without the landowner’s permission.

Rent Issues

For a long time, it has been the practice to provide just a flat rate as rental, which was payable monthly. However, it has become common now to agree upon a percentage rental, which is payable annually, along with a guaranteed fee. But, very often, landowners fail to negotiate a clear deal that specifies the percentage will have to apply to all income that result from the use of the billboard, including income that comes from non-advertising sources. Many cellular providers mount equipment on these signs. Though most probably, it will be a temporary solution, there are many such nuances that have to be discussed carefully when the billboard leases are signed.

Term Issues

Due to the high demand for these billboards and scarcity of locations, operators attempt to negotiate longer terms, and automatic renewals unless adequate termination notice is given. Each party should also place triggers into the lease that provides a right to terminate under those trigger circumstances, albeit with notice. This notice should be clearly specified in the billboard agreements.

Compliance with the Laws

It is important that the owner make a clause in the agreement that requires the operators to comply with all the laws regarding billboard advertisements that the government has put up, as well as maintain the sign and the surrounding area in a clean and attractive manner. Processes, like obtaining permits, and compliance to spacing and placement regulations, have to be done to maintain the land and billboard legally.

Restriction on Advertising Type

It is possible that landowners will want to insert some clauses in the billboard leases restricting the types of advertisements that can be legally placed on the billboards to avoid offensive or distasteful advertising. They can also prohibit advertisements by certain types of businesses that they find to be offensive to them or to other on-site tenants. The landowner can place restrictions that allow them to approve every advertiser individually. The operators may want to place restrictions preventing the owner from placing competing advertisements on another portion of the property.

Other issues such as taxes, utilities, insurance, warranties, and ownership also have to be specified when the landowner and the operator draft billboard agreements for regulating billboard usage.

Association of Construction and Development