After you’ve gone to all the trouble of getting your billboard ground lease signed up, you want to take all the steps possible to protect your creation, right? In this Billboard Mastery podcast we’re going to explore two different ways to better safeguard your ground lease and how to get those accomplished.
Episode 105: Two Important Ways To Protect Your Ground Lease Transcript
You put in a lot of effort to get your billboard ground lease signed. Don't you want to protect that? Don't you want to do everything possible to lock in security in the agreement you got executed? This is Frank Rolfe, the Billboard Mastery Podcast. We're going to talk about two things you should consider doing with your ground lease to better protect your interests. The first one is to record your ground lease. Now, what does that mean? It means you take your ground lease down to county records, and you have it recorded as a ground lease against the property.
Now, why would you want to do that? Well, because if you don't record your lease, what could happen is if they sell it to another buyer, that buyer might say that they're not bound under it because they had no knowledge of its existence. Now, before you do any such thing as record the lease, talk to your attorney. Recording of leases is very state-specific, and in your state it may or may not be a good idea. Another issue of recording the leases, it may freak out the property owner. They may say, "I never gave you the right to record my lease." So, do a lot of homework before you take that step. But if you take the step where it will benefit you might be, particularly if you're looking at building a billboard on raw land, is if that land sells before you build the billboard, that next owner will not more than likely be bound by the lease that was signed. Because they will say it was not of record, they were not notified of it. However, if it is recorded and the property changes hands, they can't say they were unaware of it because they knew about it when they bought the land.
Now, in many states, if you already have the billboard on the land, that serves as notice that they have to at least inquire about the lease. So, that will have a lot less impact if the sign is built than if the sign is not built. But in either case, you would definitely want to talk to a good licensed lawyer in your state to see whether this is a good step for you to do or not. To record a lease, you'll typically have to have some kind of memorandum notarized, signed by both parties, giving you the right to have it recorded. And you'll also want to talk to your attorney about what that looks like. And maybe add them at the bottom of your leases going forward, you have something on there where both parties sign and then have it notarized, giving you the right to then record it. But you should definitely check that concept out.
Now, another thing that you can do to protect your lease is to actually have the lender, if there's a loan on the property, sign something where they acknowledge the lease exists and they approve it. Now, why is that important? Well, because if your property owner should declare bankruptcy, in most states and in most cases your lease can be negated by the lender. That's just a common part of bankruptcy law. But in many states not; that issue will not occur if in fact the lender has ratified it.
I once owned a billboard in Dallas back during the Savings and Loan Crisis. It was located on Central Expressway, a very, very well known and major artery, and it was a very, very valuable sign to me. And I decided, because things were so sketchy in Dallas back then, a lot of bank failures and stuff, a lot of bankruptcies, that I should go in there and get the lender to sign off on my lease, talk to the property owner, and they were okay with the idea. So, I went to the lender and I had them sign off, ratify the lease. And right after that, what do you think happened? The property owner went bankrupt.
The bank tried to cancel my lease. They wanted to sell the land; it was raw land. And they thought it would sell for more money if the billboard was gone. So, they sent me a certified letter saying, "Hi, we're terminating the lease, get it out of here." And to which I went to our lawyer and they said, "Well, you can't do that. You see, Mr. Bank, you already ratified it. You agreed to this lease, and this lease has got 20 years to run on it. So, we'll put it in a file and we will remember to try and take the sign down 20 years from now." Absolutely infuriated the bank that they'd put themselves into that trap. But that's what happens when the lender signs off on the lease typically.
Once again, I would not take the step without it being approved completely by not only your lawyer, because you want to make sure in your state that that's actually true and worthwhile. And secondly, I want to talk to the the property owner. You wouldn't dare go to their lender without their explicit permission. I would also endeavor to look into any other rights in your state regarding taking any such action. But again, another tip that you should definitely ask about, talk to your attorney about it to do some research based on state law, see if that would not be one additional way to protect your interest and rights in that lease.
The bottom line is there's a lot of thoughts out there, a lot of urban legend on things that help and are unhelpful. Those are two things that I found historically to be of importance, which I think you definitely should spend a little time researching in your leases. Not that you're going to want to necessarily adapt it or adopt it, but at the same time, your attorney may say, "Oh, that is a really smart idea." And what the heck? You got it right here on the Billboard Mastery Podcast for free. This is Frank Rolfe with the Billboard Mastery Podcast. Hope you enjoyed this. Talk to you again soon.