Tenant Must Pay Owner for Placing Antenna on Building's Roof

A lease gave an office tenant the option to renew the lease “at the prevailing market” rate. When the tenant tried to exercise the renewal option, the owner and tenant couldn't agree on whether a renewal at the prevailing market rate allowed the owner to charge the tenant rent for placing its antennas on the building's roof. The tenant argued that because its original rent was based on the square footage of its office suite, the “prevailing market rate” for the renewal term should be based on comparably sized suites, not including the roof.

A California appeals court ruled that the lease allowed the owner to charge the tenant rent for placing its antennas on the roof. The court noted that by the late 1990s, owners were charging rent for rooftop placement rights. Here, the court said, the lease described the tenant as operating a telecommunications facility, with rooftop antennas. Plus the option required a lease renewal at the “prevailing market rent.” The court reasoned that those terms indicated that the renewal rent would “be fixed by the rate prevailing for similar telecommunications facilities.” That meant the prevailing market rate related to the tenant's use, not comparably sized office suites [Kay v. Gateway Tower, LLC].