Most agreements have a definitive start and end date. But a good billboard agreement should never have the latter. In this Billboard Mastery podcast we’re going to discuss how to construct leases that never end.
Episode 99: Why All Good Leases Have No Official End Date Transcript
When you go out and rent an apartment, you end up with a lease that has a start date and it also has an end date. But in the world of billboards, our goal is to construct agreements that have a start date, but never have an end date. This is Frank Rolfe, the Billboard Mastery Podcast. We're gonna be talking about effectively constructing evergreen, never ending lease agreements with both property owners and also advertisers. Now, let's first talk about property owners, your ground lease to build the billboard. Now you go to the property owner and you say, "I wanna lease this property for 20 years. 10 years, and then a second term at my option for another 10 years." And the goal though is that once we build that billboard and we start that time clock on 20 years, the odds of that person remembering 20 years into the future is just about zero. And then often, frequently, they're not even alive 20 years into the future, they've died and now you've moved on to somebody else you've never even heard from before. And of course, they don't even know there is a billboard lease. So the key item on the billboard lease itself is to have the ground lease continue on, on a year to year basis until it's terminated by the lessor.
Because now what happens is if they forget the end date, well, that's okay, it just keeps going and going and going and going. I've seen and have purchased billboards with ground leases that are in their 30th or 40th year because the property owner has forgotten it even exists. And the way that it's written, it just keeps rolling on and on forever. Sometimes, you can actually construct in the lease that it rolls over for a like period, if not terminated by the property owner. Now, many will not let you do that 'cause they know they're gonna forget the date. But there are billboard leases out there where there was like a 20-year initial term and they didn't cancel, and it rolled for another 20 years. But whatever you do, don't have it where at the end of the lease, it says in the agreement you have to negotiate a new agreement, because now you can't get around that. If they forgot that it's 20 years from now and the date's finally coming up after two decades, you have to reach out to them and remind them. And of course, when you remind them, they're gonna want to have more rent. So just let it be. Don't poke the dog, just let it roll and roll and roll and roll in an open-ended fashion, 'cause the odds are they're never gonna remember when that came up. Not even close.
Now let's talk for a minute about ad leases. That's a different thing 'cause ad leases are much shorter. The average billboard ad lease is typically about a one-year period, just 12 months. So they're not gonna forget about it. You can't say, "Oh, they'll never remember." But yet, maybe they won't. You can put in your ad lease that the term is for one year, and then continues on on a month to month basis unless terminated by the advertiser with, say, 60 days advance written notice. Done that many times. Or you can have an agreement, which from the onset, can always be terminated by the advertiser with X number of months advance written notice, three months, four months, something like that. Now when you do leases like that, of course you run the risk, because the way it's structured, it might end up being shorter than you hoped for. But it means unless they don't cancel in the first two months, you're gonna get at least a six-month lease out of it.
And often in those situations, they just keep going on forever. I've had ad leases where I had the same advertiser on the sign from when I built it, when I sold it, and they'd never canceled. Because if a billboard is working out for the advertiser, why would they cancel it? But you know what? If you had to go to them, if the lease had a finite end date, it didn't say, and just continues on month after month after that period, then once again, you'd have to go poke the dog and say, "Excuse me, you probably forgot, but the lease is coming up. Do you wanna renew?" At which time they may say, "No, I don't want to." Or they might say, "Yeah. Well, but times are hard, I want a lower rate." The key to it all is don't think that you have to have an end date in agreements. Make sure, however, that whatever you think the end date is, whatever your plan is, that you have vetted that by law in your state to make sure whatever you have does actually work. But if the law allows it where you can have a lease that keeps rolling and rolling until terminated by the property owner or until terminated by the advertiser, then by all means do that, because that can buy you months, it can buy you years, it can buy you decades. And that's all important in an industry where renewal is so very important. This is Frank Rolfe, the Billboard Mastery Podcast. Hope you enjoyed this. Talk to you again soon.