Add Seven Key Lease Protections to Prevent Problems from Tenant-Installed Wi-Fi Network

Wi-Fi, short for “wireless fidelity,” is one of the latest ways to connect to the Internet. And considering the growing number of “hot spots”—that is, places offering Internet connection through a Wi-Fi network—Wi-Fi isn't likely to be a passing fad. The use of Wi-Fi hot spots has grown dramatically since Wi-Fi providers—such as T-Mobile and Boingo—installed hot spots in retailers like Starbucks and Borders. Wi-Fi is now expanding to airports, grocery stores, hotels, college campuses, stadiums, city parks, phone booths, McDonalds, and other restaurants. According to the research firm ABI, the number of Wi-Fi access points will reach one million by 2008.

Since Wi-Fi is a new technology, chances are your leases don't adequately cover it. And tenants probably don't need your permission to set up a Wi-Fi network at your building or center. That could be a big problem for you. The tenant's Wi-Fi network could interfere with your building's or center's systems, or with other tenants' telecommunications equipment, leaving you in the middle of a nasty battle between your tenants. Or the tenant's Wi-Fi network could interfere with your own plans to set up a Wi-Fi network in the building or center in the future—and that could cost you money.

These are just a couple of the reasons you should add seven key protections to your lease with a tenant. We'll tell you about these protections, which are based on the advice of New York City telecommunications and real estate attorney Jeffrey A. Moerdler. And there's a Model Lease Clause on p. 3 that you can adapt and use for your leases, which includes these protections.

How Wi-Fi Works

Wi-Fi is a communications standard that allows wireless devices to talk to each other or to connect to the Internet using radio frequencies, explains Desmond Wheatley, managing director of Wireless Facilities, Inc. Any data that you can send over a wire—such as voice, video, or text—you can send over a Wi-Fi network, though typically at higher speeds, he says. Although the users' equipment is wireless, the Wi-Fi network typically includes wires, notes Wheatley. At least one access point—that is, a radio transmitter about the size of a videotape—in the Wi-Fi network must be connected to a wired high speed telecom infrastructure, such as a fiber optic line, T1 line, or DSL, Wheatley explains. Multiple access points can be set up in your building or center to create a Wi-Fi network, he adds. And users must be within this range to access the network. Each access point in the network has a range of up to 300 feet, depending on the improvements to the property (for instance, whether the building or center contains a large amount of concrete and steel) and interference from other systems, says Moerdler.

Users can connect their computers or other devices—such as laptop computers or personal digital assistants—to a Wi-Fi network at hot spots or other network locations. Most Wi-Fi providers charge users for access to the Wi-Fi network. And if the Wi-Fi network is in, say, a restaurant, the provider would pay a fee to the restaurant or to the property owner. Some locations with Wi-Fi charge users for access, while others offer free access as a draw to sell their products or services.

To use the network, the user's computer or other device must be Wi-Fi-enabled. Most new computers and other devices come Wi-Fi-enabled with built-in wireless modems, says Wheatley. In fact, most—if not all—of the newest computers and other mobile devices are Wi-Fi-enabled with Intel's recently introduced Centrino mobile technology, he notes. And older models can be easily and cheaply updated with a Wi-Fi PC modem card, he adds.

SEVEN PROTECTIONS ADD TO LEASE

Make sure your lease, like our Model Lease Clause, includes these seven protections:

* Confine Installation of Wi-Fi Network to Tenant's Space

Give the tenant the right to install a Wi-Fi network—but only within its space. If you let a tenant install Wi-Fi in the common areas of the building or center, you're asking for trouble, says Moerdler. For instance, your lobby may become cluttered with people surfing the Internet on their laptops. Or you may find that the tenant's Wi-Fi network is interfering with the Wi-Fi network that you decided to set up elsewhere in the building or center, he explains. As added protection, say in the lease that only the tenant and its employees and clients (or customers) can use the Wi-Fi network, he says [Clause, par. a].

Practical Pointer: You may have to give a very big, strong tenant the right to install a Wi-Fi network in the common areas, Moerdler points out. If you do, you'll need to make clear some additional points in the lease, he says. For instance, the lease should say: 1) where in the common areas the tenant can install its Wi-Fi communications equipment; 2) which parties (such as the tenant's employees, authorized agents, and contractors) will have access to that equipment; 3) when those parties can have access to that equipment; and 4) whether you have the right to approve the Wi-Fi communications equipment that the tenant can install in the common areas.

* Make Installation Right ‘Subject to’ Other Lease Clauses

Make the tenant's right to install its Wi-Fi network subject to all the clauses of the lease, says Moerdler [Clause, par. a]. This way, even though the other clauses don't specifically mention the tenant's Wi-Fi network, the rights and protections in those clauses apply to the Wi-Fi network. For example, you can force the tenant to remove the Wi-Fi communications equipment at the end of the lease term under the lease's standard restorations clause. And the tenant must indemnify—that is, defend and hold you harmless—from all claims arising from its Wi-Fi network under the lease's standard indemnification clause. Plus, based on the lease's standard alterations clause, you can force the tenant to get your approval before it makes structural changes to its space to install a Wi-Fi network, Moerdler says.

* Bar Wi-Fi Solicitation by Tenant

Bar the tenant from trying to sell the use of its Wi-Fi network to other tenants or occupants [Clause, par. b]. You don't want the tenant turning its Wi-Fi network into a profit-making side business, Moerdler explains.

* Bar Frequency Interference by Tenant's Wi-Fi Equipment

Frequency interference is a big concern when a tenant installs a Wi-Fi network in its space, warns Moerdler. That is, the tenant's Wi-Fi communications equipment—which probably includes antennas, switches, and cables—could cause radio frequency, electromagnetic, or other interference. And that interference could disrupt your and your other tenants' telecommunications or other equipment operations, he explains. To prevent this, make the tenant agree in the lease that neither it nor its telecommunications service provider can install any Wi-Fi communications equipment that could interfere with your and your other tenants' telecommunications or other equipment, he advises [Clause, par. c].

* Require Immediate Fix for Interference Problems

Make the tenant solely responsible for fixing any interference problems at your building or center caused by its Wi-Fi communications equipment, says Moerdler. You should be responsible for notifying the tenant if any interference problems exist, since other tenants are most likely to complain to you or your property manager about them, he points out. Say in the lease that if the tenant doesn't fix an interference problem immediately—say, within 24 hours (or less, as you decide) after you've notified it of the problem—you can ask the tenant to shut down its Wi-Fi communications equipment until the problem is fixed, he says. If the tenant wants to test the equipment intermittently after a shutdown, require it to notify you and get your approval before conducting the test, Moerdler adds [Clause, par. c].

Practical Pointer: Expect a savvy tenant to demand that you agree in the lease not to unreasonably withhold your approval for a test of its Wi-Fi communications equipment after a shutdown, says Moerdler. That's a fair demand, he says.

* Resolve Wi-Fi Disputes with Expedited Arbitration

If there's a dispute between you and the tenant over interference—that is, whether there's interference or whether the tenant has corrected the problem—get the right to settle the dispute by expedited arbitration, says Moerdler. This should resolve the dispute more quickly and cheaply than a lawsuit, he says. Your lease may already have an expedited arbitration clause, notes Moerdler, but make sure you can choose an arbitrator who's very knowledgeable about the telecommunications field. You don't want to waste valuable time and effort educating the arbitrator about telecommunications. Moerdler suggests requiring an arbitrator who's an engineer with many—say, at least 10—years of experience in telecommunications [Clause, par. d].

Practical Pointer: For more information on what to say in an expedited arbitration clause, see “Use ‘Expedited’ Arbitration to Control Tenant's Special Rights,” CLLI, Sept. 2003, p.1.

* Installation Right Isn't Exclusive to Tenant

Have the tenant acknowledge that you've granted and/or may in the future grant various lease rights and licenses to other tenants and occupants of the building or center, as well as to telecommunications service providers, says Moerdler [Clause, par. e]. Otherwise, the tenant may argue that it's got the exclusive right to install a Wi-Fi network at your building or center. And it might try to stop you—or the other tenants or occupants—from signing Wi-Fi agreements with any telecommunications service providers, he warns.

CLLI Sources

Jeffrey A. Moerdler, Esq.: Partner, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, PC, Chrysler Ctr., 666 3rd Ave., New York, NY 10017; (212) 692-6700; jamoerdler@mintz.com.

Desmond Wheatley: Managing Director, Wireless Facilities, Inc., 4810 Eastgate Mall, San Diego, CA 92121; (858) 228-2620; Desmond.Wheatley@wfinet.com; http://www.wfinet.com.