Land Lease Rates

Do you see any drawbacks to basing your land lease payments strictly as a percentage of the rental income? For instance, we’re discussing with a landowner a 10% land lease rate based on the monthly revenue. So for signage bringing in $1,200 a month for the year, we would then pay the landowner $120 monthly for the year. If the sign is vacant, no rent due. Thoughts?

Alot of companies do that in this industry. Personally none of my leases are like that, I guarentee my property owners income every month, considering my structure is there 24/7… not to mention I lock in a lease rate in todays market and 3-5 years from now i’m getting a premium and they are still getting today’s market rates for land rental. The bad economy has done wonders for my plant.

Straight percentage ground leases are hard to convince landowners to sign. They are definitely good for sign owners and bad for landowners. If the sign sits vacant, the landowner gets nothing – and most are unhappy with that proposition. I have only had success getting those signed in real rural areas with questionable demand, in which the structure sits out on a farm where the landowner rarely sees it. Normally, they want some guaranteed compensation for just the “ugliness” factor if it is in their parking lot.

But if you can get them, then by all means do. Make sure to give them at least $100 or so upon lease signing – in many states a lease that has not yet paid the landowner any compensation is not binding. Check your local laws.