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Purchasing a new billboard easement for a location with a current billboard lease can be an enticing way for billboard owners to lower their direct expenses and guarantee long-term control of the underlying real-estate. In addition to billboard companies seeking the easement to eliminate lease cost, we also see investment companies and private investors seek out billboard easements to leave the lease in place for the recurring leasehold income.
If you are considering purchasing a new easement, below are 8 tips to strengthen your position in the transaction:
There are two classifications of legal billboard locations: Conforming and Legal Non-Conforming. In summary, billboard locations that are conforming abide to the current municipal and state regulations and can be rebuilt in the event the billboard is severally damaged, or have the configuration changed. Non-conforming billboard locations no longer abide to the current municipal or state regulations and cannot be rebuilt in the event the billboard is severally damaged, or changed in any way (i.e. converting a static face to a digital face). Understanding the current permit status of the billboard location can help assess the risk profile of the easement investment.
In order to perfect the integrity of the easement, it is important to obtain a survey that legally describes and visually depicts the easement boundaries. The easement area can be added as an Exhibit to the recorded Easement Agreement. In addition, to ensure the easement area covers any future billboard re-configuration, add language in the Easement Agreement that the easement area incorporates any present or future overhangs from the billboard (i.e. new camera arms).
Incorporating access, utility, and visibility language in the Easement Agreement will protect the intended use(s) of the easement and ensure no issues with future property owners.
Once you pull a title search on the property, ensure the grantor signing the Easement Agreement matches the current owner of the property. In addition, if there is an existing mortgage, the grantor will need to obtain permission from the lender in order to legally grant a perfected easement. In most cases, a lender with an existing mortgage will require the property owner to submit a partial pay down on the loan as the property owner will be exchanging recurring leasehold income for a lump sum payment.
If there is an existing mortgage on the property and the lender does not agree to a partial release of the easement area, obtaining a Subordination and Non-Disturbance Agreement with the lender will protect the easement in the event of a foreclosure.
Add just-compensation language in the Easement Agreement in the event of condemnation. In addition, in the unlikely event that the billboard needs to get relocated outside of the defined easement area, add language that the property owner allows for a new easement underneath the relocated billboard.
If you are an investor looking to retain the billboard lease income, obtain an estoppel from the billboard owner. In addition to confirming rental terms and the lease term remaining, also verify there are no other agreements, amendments, or contracts that you are unaware of.
Lastly, record the fully-executed Easement Agreement to ensure the easement is on file to any future buyers or lenders. For further protection and clarity, add language in the Easement Agreement that states the granted easement runs with the land and in the event the grantor sells the underlying real estate, the easement continues to be part of the premise that is sold to a new buyer.
If you want assistance on buying, selling, or financing billboard easements, reach out to Chris Stark or Craig Berry at Stark Capital.