We all drive by billboards, but you probably have never thought about how they make money. In California and other parts of the country, billboards are everywhere. In fact, there are an estimated 368,000 billboards across the country. A landowner may have a billboard on their property but have no real understanding of what can be done with it, how to handle negotiations for a billboard lease, or know what to do if a problem arises.
Here are a few frequently asked questions landlords may have when they have a billboard on their property:
Owning billboards can provide good cash flow, if care is taken to negotiate a solid lease. Having a billboard on your property adds value to your property, whether you use it to advertise your own business or lease the billboard to someone else. You need to know the government regulations that apply to each use.
If you are unfamiliar with billboard leases, it is a good idea to consult with us to ensure your interests are protected. Generally, it is important to pay attention to the length of the lease term. Leases for billboard use often run between five and twenty years, or longer. Because of the length of time involved, it is important to ensure that you are covered for inflation. In California, a ground lease over thirty-five years may result in an increased valuation for property tax purposes.
Consider how a billboard might affect your ability to build on the property. What happens if the billboard is damaged or destroyed? If a government agency takes your property, how will the compensation paid by the agency be divided. These are just a few of the issues to consider.
The cost of building a billboard will depend on the size, type, and location. If there is easy access to the site, it will be far less expensive than if a foundational hole needs to be dug by hand. A sign with a static face may cost around $75,000 or more to build. A digital sign will cost hundreds of thousands of dollars, and will not last as long as a static sign. On the other hand, a digital sign will generally realize much higher revenue.
There’s an old joke about real estate. The three most important factors are location, location, location. That’s also true of billboards. Market area, visibility, and traffic circulation are all a function of location. All affect the intrinsic value. The time of year will also affect the price. During an election cycle, space on a billboard may be at a premium. As with everything else, when the economy is good and demand for advertising is higher, a billboard will command a higher price.
An easement is an interest in the real property of another, which allows the owner of the easement a limited use and enjoyment of the land. Some landowners are willing to sell a permanent interest in their land to a billboard company. An easement raises all the issues of a lease, and others. At the same time, selling or buying an easement for billboard purposes can make sense for both parties.
Yes. People may sell their billboard leases for various reasons which can include things like dissolution of a partnership, for estate planning purposes, or can be used where the property owner is experiencing a financial shortfall.
Yes. You would still own 100% of the property, subject to the rights conveyed by the lease. It introduces a new layer of complexity. You need to look carefully at the implications of giving up control of the leasehold.
If you are a landowner and are dealing with a billboard issue, it is important to get legal guidance to ensure your rights are protected. We have been working in the industry for decades and can guide you through the various options you have regarding your billboard. Come talk to us or hit Reply to schedule a Get Acquainted Call.
