How to Create a Building Naming Rights Agreement

Before you dive in, if you are interested in sport sponsorship, check out these titles in our “sponsorship for sports” series:

• Resource Page for Sport and Athlete Sponsorship
• How to Write a Sports Sponsorship Proposal
• The Best Companies for Sports Sponsorship
• Why is Sponsorship Important in Sport?
• The Definitive Guide to Sports Fan Engagement
• The Rise of Insurance Companies in Sports Sponsorship

In sports sponsorship especially, naming rights are one of the premier assets you can offer. Even outside of sports deals, naming rights to an office or hospital wing can be highly lucrative. If you’re at the point where you’re negotiating building naming rights with a sponsor, how do you do it?

Here’s what should go into a building naming-rights agreement:

• The new name of the building
• Naming rights duration
• Where signage will be displayed
• Rules on changing the name
• Payment terms
• Promotional benefits
• Termination rights 

I must add the disclaimer that I am not a lawyer and thus the information in this post shouldn’t be taken as legal advice. I would recommend consulting your lawyer with your first draft of a building rights agreement before you send it to the sponsor.

What Is a Building Naming Rights Agreement? 

Okay, so let’s take it from the top. Exactly what is a building naming rights agreement? 

This legal agreement negotiates the terms and conditions of a building naming rights deal. Naming rights, if you missed this post, are the legal right to name a building after someone or something, usually a company.

As I mentioned in the intro, naming rights are huge in sports, but all sorts of buildings utilize naming rights. For example, there are high-rise office towers, office complexes, popular shopping malls, hospital or library wings, or academic buildings on college campuses with naming rights deals.

New York City’s Chrysler Building is an example, as is Atlanta’s Bank of America Plaza, New Jersey’s MetLife Stadium, and Maryland’s FedExField. 

Building naming rights are hugely valuable to a sponsor. The free promotion they can generate extends beyond your event (unless the naming rights deal is only for the duration of the event). Plus, having your name on a building makes you a part of that building’s history forever. 

Even when the building is inevitably renamed, that doesn’t erase its history of prior names. What sponsor wouldn’t love that kind of historical relevance?

If you’re looking to raise some major funding for an event and naming rights are within your reach, these assets usually sell for a premium. 

What Goes in a Building Naming Rights Agreement?

Putting together a building naming rights agreement will involve collaboration between you and your company or organizations’ representatives, your lawyer(s), the sponsor, and their lawyer(s). The building landlord(s) will also be involved. 

Here are the terms and conditions you want to add to the agreement to start.

The Naming Rights Being Offered

This might seem obvious, but you want it in writing anyway. This section of your formal agreement should state the full proposed name of the building per conversations that you and the sponsor had about naming rights.

If the building name has specialized spelling–like in the case of FedExField as discussed in the last section–please stylize the spelling as requested by the sponsor. 

If you and the sponsor have yet to sign on the dotted line, then the agreement is not yet legally binding. Thus, the sponsor could see the proposed building name and want to change it because they’ve come up with something better since you two last talked. 

You should expect to ping-pong versions of your building naming rights agreement between you and your lawyers and the sponsor and their lawyers. However, once the name is legally chosen, changing it will constitute more of a process. I’ll talk about this momentarily. 

The Duration of the Naming Rights Deal

Another important term for the contract is how long the naming rights deal will apply. As I talked about in my post on sponsorship naming rights (here’s that link again), the duration of the naming rights will vary.

For smaller buildings or wings within a pre existing building, the standard naming rights duration is about three years. Larger, more high-profile buildings such as sports arenas, shopping malls, sizable office complexes, and high-rises often fetch 10-year or 20-year naming rights deals.

Only you know how long you have naming rights to the building in question. Even if it’s a larger building, you might only be able to offer a five-year naming rights deal. That’s up to the sponsor whether they’re on board with that. 

You might want to include a clause about amending the duration of the building naming rights deal if that’s something you can do. 

How the Name Would Be Changed and How Name Change Approval Occurs

I said I would get to this, so I want to talk about changing the provisions of the agreement. 

Even if you don’t anticipate that the sponsor will want to change the name of the building, it’s still a good idea to include this clause anyway. 

In the clause, you’d detail to which extent name changes are allowed. Using the FedExField example again, maybe you’d let the sponsor change the name to FedEx Field, but not something like FedEx Hall of Champions. Or perhaps you let them change the name as they wish. 

You also want in the clause the approval period for building name changes (such as 30 or 60 days). 

Very importantly, you must mention who will foot the bill. Perhaps you agree to pay for a name change provided it’s a simple one (i.e., FedExField to FedEx Field), but the sponsor would have to pay for an extravagant name change (FedExField to FedEx Hall of Champions).

Where Signage Will be Displayed 

Building naming rights include more than simply a name, but signage displaying the new name of the hospital wing, sports arena, etc. In your building naming rights agreement, you must list approximately where on the building’s interior and exterior the named signage will occur.

You should have received permission from the building’s landlord to add signage. The landlord should be clear on what kind of signage is allowed, such as its size, design, color, type, and style. If the landlord has rules enacted that limit the scope of the signage, then don’t offer those options to the sponsor to begin with. That’s a great way to land yourself into potential legal trouble. 

What Kind of Promotional Benefit the Sponsor Should Expect

Sponsorships are partnerships, so as much as you’re wondering what’s in it for you, the sponsor wants to know what’s in it for them as well. By offering naming rights, what kind of benefits will the sponsor receive?

Keep in mind these are promotional expectations and not guarantees. You should use research on the sponsor as well as the building’s past tenants to create a set of realistic benefit expectations. 

For instance, if the last tenant with naming rights had 20 percent more website traffic or 34 percent more sales, those are reasonable outcomes that the current sponsor might expect. 

The Full Terms of Payment 

In exchange for your building naming rights, the sponsor will agree to pay you a certain sum. That sum should be disclosed in the agreement, as should the payment terms. 

For example, some sponsors might agree to pay a lump sum while others will pay you incrementally. In the latter case, the full payment schedule (with expected payment delivery dates) should be listed in the contract.

If you’re going to take a portion of those funds to pay for the building signage, that should be detailed in this clause as well. List the precise percentage of money received that will go towards updating the building. 

Termination Rights 

Towards the end of the contract should be a beefy clause about termination rights. This clause can legally protect your hide and do the same for the sponsor, so it needs to be quite detailed. 

First, list the terms that would legally allow you to exit the contract without recourse. For example, perhaps the sponsor modifies the building outside of the landlord’s terms. Since you’re beholden to the landlord, not the sponsor, their alterations fall on you. 

If the sponsor is late on payments, you might have a clause allowing a late payment once. Then, you might raise the interest or charge extra for each subsequent late payment. If a sponsor is late to pay X number of times, you could be allowed to terminate the contract.

Then you need to detail the termination rights on the sponsor’s part. They might request adding this section of the contract by themselves. On the sponsor’s side, they might be able to terminate the contract if the signage is not where you two agreed on or if the signage does not match the description promised.

Besides ending the arrangement, the sponsor might be able to request a refund as well. 

Conclusion

Writing a building naming rights agreement requires a lot of legalese. I don’t recommend doing it yourself. You should work with your sponsor, your landlord–and above all else–a team of lawyers to ensure the contract is fair for both parties.

Once you sign the contract, everything in it becomes legally binding, so please triple-check that the terms are agreeable first.

Creating a contract-writing process for sponsors can be difficult the first go-around. For each subsequent sponsorship opportunity though, you’ll have standardized your process so contractual negotiations can move swiftly and smoothly!