*Time sensitive* Buying a property with a cell tower, hoping for some advice

[leasedfee]

It's all about property rights. What you get or don't get, and the productivity or "utility" to use an economist term that it generates. From there we start looking at cash flows. Thus, get a copy of a title commitment (aka preliminary title policy) that the title company will issue upon closing (becoming the "title policy"). Make sure everyone is in agreement that these are the property rights that will be transferred at the closing table. . . . An appraiser familiar with eminent domain can help you with the permanent easement questions. Yes, land can be valued seperately; the question up in the air for you (pun not intended) is the land to be valued encumbered or unencumbered by the easement, and/or leased fee with the existing lease? Even if you don't get an eminent domain appraiser to give you value, he or she could help you break apart the pieces and figure out what is what, and what is not what. . . . for example, take into consideration that an exclusive vs. non-exclusive conveyance clause in a permanent easement may have an impact on value to the remainder. Other questions is it an easement in gross or specifically carved out (and potentially creating an uneconomic remainder).

 

[Terrel L. Shields]

The cell tower information was a surprise to both our real estate agent as well as the seller's agent

I am just guessing but I bet the sellers found out after looking at the fine print of their lease that they had a number of hoops to jump through.

I remember one such cable tower in our town that went before the board of equalization. An elderly couple leased it for the princely sum of $50 a month or some such and it covered over an acre with guylines. The fine print was that if they died before the end of the 15 yr lease, the tower could exercise the right to buy the property for a flat $15,000. Mind you this was adjacent to some commercial property that was selling for $4 a SF at the time. The daughter of the surviving spouse contested the assessors valuation of $90,000 due to the low lease terms. This was september. The lease was due to expire in November and the surviving owner was in a rest home and it was a death race to see if the lease expired before the old woman did. We cut the tax assessment back to $15,000 for that year...

 

[Mountain Man]

I will definitely look into what their contract stipulates. They've told their agent that they don't plan on letting us look at the entire contract...

No deal. They must provide all documents in the due diligence period or cancel the contract. Also keep in mind that unless YOU hired "your agent" as a Buyer Agent, the agent is NOT working for your best interest. This is a case which a few hundred bucks to get an attorney involved is well worth it.

 

[PhaedrusZen]

I do trust our agent. She may not be specifically qualified for this type of transaction (nobody involved even thought it would be this complicated of a transaction), but I believe she is doing her best to do right by us. She's a co-worker's wife, and has been diligent in helping us during our house hunt, even when we started steering toward a $30,000 "super fixer-upper". Yeah she's making a commission off the sale, but she has voiced her own concerns with moving forward without having all of the information on the table. I think she knows it's in her best interest to make sure we have a good experience, since I'll be working closely with her husband for the next 20 to 30-odd years.

We're waiting to hear back from them, but I've decided not to submit another counter offer without first being given all of the pertinent information pertaining to the transaction on the tower as well as the easements being granted.

I really appreciate the information that has been shared so far.

 

[PhaedrusZen]

So we finally got a look at the contract that the sellers want to sign with the cell company. If they sign it as is, we'd have to walk away.

As it stands, the contract gives a perpetual easement for the tower and the immediate area around it, and two other easements, one for access and one for utilities. The easements are all relatively out of the way, but looking at it from a real estate standpoint, there is a no-build zone in the radius of the cell tower, and it essentially permanently renders about a half acre of land unusable, permanently. The contract also gives the company the power to move the tower anywhere on our property should a "zoning" issue arise, without our input or consent.

The icing on the cake is that the company would require the property owner (which would have been us) to purchase and maintain a 1 million dollar insurance policy, naming them as the beneficiaries. So in addition to losing a half acre of the property, having a loss of value due to the permanent easement and giving up any ability to dictate or even have any input as to the future of the tower site, we would get to have an additional monthly bill to maintain an insurance policy that we wouldn't need or even be able to use (the deductible for said policy is $100,000, from my research).

Any ideas? They haven't signed, but are meeting with a lawyer today. Our agent has passed on our concerns, but who knows if they'll take any of that into account. Has anyone ever heard of something like this happening?

 

[leasedfee]

Aren't you glad you looked at the contract, rather than accepting lip service!
If this permanant easement agreement (dominant estate) is executed, then the value the servient estate (subject) parcel is worth less. (And your situation clearly illustrates why it is called the servient estate to the easement.)

You have to start-over in your valuation of the servient estate. Everything has its price, including the capitalized expense of the insurance policy and the liability risk of having to cough-up a deductable, if some kid falls from the tower or gets his kite caught in it

. . . . . The property might be able to be subdivided, i.e., replatted, into two parcels to seperate the legal rights/responsibilities. This can cost $10,000 to $20,000 to $50,000, more, or less, depending on the laws and strigency of the planning authorities or your part of the world. It'd solve many problems and would be the cleanest real estate solution.

. . . . Or you buy it in an LLC/corporation. You may lose some tax benefits if this is your primary residence. And mainstream financing becomes impossible.

. . . . Or the current owner doesn't muck up the property with easement encumberances, and sells the property as one entity.

Back to paying work.

 

[PhaedrusZen]

I wish we could sub-divide. The zoning for this area is such that no parcel can exist under 5 acres, which this parcel already is. Thanks for the advice. I'll keep you posted on the outcome.

As of now we haven't heard the results of the sellers' meeting, but are pretty sure if we pursue the property it will be after we offer a significantly lower bid, to account for the loss of value and added expense of the contract stipulations.

 

[PhaedrusZen]

Thanks for the advice, and I'm glad we're not locked in. They've met with a lawyer and the rumor is that the lawyer says "it's much more positive" than I've interpreted the situation (I really can't imagine that, unless that means they've decided to either lower the asking price to reflect the negative effects of the easement, or, fingers crossed, they've decided to cancel the easement transaction altogether).

I've thought about sub-dividing the parcel, but the zoning in this particular area only allows for a minimum of a 5 acre parcel, which this property already is.

Again, I appreciate the timely replies. I'll update when the sellers quit stalling and finally give us something concrete about what their intentions are. I'm just ready to know if they're going to be reasonable, or if we've wasted our time.