HomeMy WebLinkAboutLegal Lease Review 4-14-06Doug Ruth
From: Stephen King
Sent: Friday, April 14, 2006 10:30 AM
To: Chris Thorn; Lorrie Rempher; Dennis Dowdy; Duane Huskey
Subject: Cingular lease
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I've looked at the sublease provisions of the current Cingular lease for the South 316th Street site and talked to Joe here
in Legal (who worked on the lease negotiations on our end), and I have to modify my initial reading of the subleasing
provisions that I gave at our meeting. Joe and I agree that the City can ask for consideration (money, cellular line, or
something else) in exchange for giving its approval for Cingular subleasing to ClearWire.
The portion of the lease at issue here is the third paragraph of section 15:
The Lease Area shall be used exclusively as a site for a wireless telecommunications facility. The Tenant may allow
use of all or a portion of the Lease Area or their Antenna Facilities by others with prior written approval of the
Landlord.
Earlier in section 15, there are similar provisions pertaining to assignment of the lease:
This Lease shall not be assigned by Tenant without the express written consent of Landlord which consent shall not
be unreasonably withheld delayed or conditioned.
Looking at both provisions, the City cannot "unreasonably condition" its written consent to the assignment, but there are
no limitations on the City's actions regarding subleases.
As a general rule, if language appears in one provision and does not appear in a similar provision, one assumes that the
language was specifically excluded from the second provision, even if it could be implied from the actual text. In other
words, the sublease provisions could be read as implying that the City's approval "shall not be unreasonably withheld
delayed or conditioned," but that language is absent, while being included in the assignment provisions. In addition, Joe
tells me that Cingular specifically negotiated to add the "unreasonable" language to the assignment provision, but didn't
ask for parallel language in the sublease provisions.
The City can withhold its approval of a sublease or ask for consideration or conditions as part of its approval. Cingular
may interpret the agreement as not allowing for consideration, and the language is open to interpretation, but we believe
that our interpretation is the stronger of the two.
I've also included an overview of some other lease provisions that could apply to the current negotiations:
Renewal
The City can't terminate the lease (or force renegotiation of the sublease issue) for 10 years after the execution of the
lease (i.e., after the first renewal). We can reopen the lease after 5 years to review the lease rate, and if the parties
cannot agree on the rent, the lease terminates.
Section 2 of the lease sets the term at 5 years, starting on September 1, 2005. Under section 5, Cingular can extend the
lease for 5 additional 5-year terms (30 years total), with the lease automatically renewing unless:
Cingular notifies the City that it does not intend to renew the lease "at least ninety 90 days prior to the expiration of
the Initial Term or any Renewal Term" or
The City may "during any Renewal Term" notify Cingular it intends to not renew the lease "for an additional Renewal
Term ... at least one hundred and eighty 180 days prior to the expiration of the then in effect Renewal Term."
I read this language the same way as Chris stated in our meeting. One renewal term has to pass before the City can
terminate the agreement.
Rate Renegotiations
Section 5 also sets out the mechanism under which the City can call for renegotiation of the lease rate at any renewal
(including the first one). During the final 180 days of "the Initial Term or any Renewal Term" the City may "conduct a
market survey to determine the fair market value of the Lease." The rent for the next term "will be established by the
results of the market survey" with the CPI adjuster from section 4 applied to subsequent years. One other interesting
sentence in section 5 has to do with what happens if the City and Cingular cannot agree on the new lease rate: "If
Landlord and Tenant cannot reach agreement on the Rent for the next Renewal Term prior to the end of the initial or any
renewal term the Lease will not renew."
Termination
While section 5 contains the termination provision for rental rate disputed, section 8 is the formal termination section of the
lease and sets out the other termination mechanisms. The ones that could be applicable to our situation are:
8a: upon thirty 30 days written notice by Landlord if Tenant fails to cure a default for payment of amounts due under this
Lease within that thirty 30 day period
8e: at the time title to the Property transfers to a condemning authority pursuant to a taking of all or a portion of the
Property sufficient in Tenants determination to render the Lease Area unsuitable for Tenants use Landlord and Tenant
shall each be entitled to pursue their own separate awards with respect to such taking
8f: Landlord may terminate this Lease if Landlord needs the Lease Area for expansion of Landlord's responsibility to
provide its services and Landlord has no reasonable or economical alternative site available provided Landlord provides
Tenant written notice twelve 12 months in advance of Landlord's need to re establish Landlord's sole use of the Lease
Area....
Let me know if you have any questions.
Steve
Stephen R. King
Auburn Assistant City Attorney
25 West Main Street
Auburn, WA 98001-4998
office: (253) 804-3108
fax: (253) 931-4007