On ROFR Clauses

Cellular sites can provide stable long term income for site owners and lease holders. That income can vary greatly depending on how the cell tower lease agreement is created. Wireless companies aren’t going to structure contracts in the owner’s benefit out of good nature. It is up to the owner to structure the contract to his or her greatest benefit.

Right of First Refusal clauses provide as good a place as any to start thinking about what to avoid in a cellular site lease.  ROFR clauses provide a contractual right to the holder to enter into a business transaction with the owner of a cellular site before that owner is entitled to enter into the transaction with a third party.

Owners that accept an ROFR do so at the expense of their own control of the site. The tenant gains the ability to deny any potential buyer in future sales of the site or property. These are generally included when the wireless company believes it may wish to own the property in the future. By nature of the ROFR, future bidders are likely to be wary of any property with a ROFR in place.  That wariness will limit the volume of potential buyers and thus control the value of the property.

Because of the likely harmful impact of ROFR clauses on the future value of a property, they are often presented with front end incentives. Despite these incentives, the negative impact must be considered before accepting an ROFR clause. Given the complexity of these clauses, and the impact on eventual profitability of a property, we recommend retaining a consultant or attorney before entering into any contract with a ROFR clause.