How to Sell Your Solar Farm Lease | Step-by-Step Guide

If you’re thinking about selling your solar farm lease, positioning it correctly is key. Buyers evaluate multiple factors, from lease duration to market conditions. A strategic approach will help you secure the best price.

Understanding Your Solar Ground Lease Value

Your solar ground lease is a valuable asset. Typically, solar projects have lease terms of 25-40 years, ensuring steady and predictable rent payments backed by strong companies. Because of this, these characteristics make solar leases highly attractive to investors who are willing to purchase your future rent payments for a lump sum today. If you are considering how to sell a solar lease, understanding these factors is essential.

When and How Can You Sell Your Solar Ground Lease?

Typically, the best time to sell your solar lease depends on the project’s development stage and market conditions. Therefore, understanding these factors can significantly impact your returns and, as a result, facilitate a smooth transaction.

Development Phase

During the early development stage, landowners usually enter into an option agreement rather than a lease. As a consequence, this arrangement provides developers with the necessary time not only to secure permits and zoning approvals but also to:

• Secure permits and zoning approvals
• Obtain utility interconnection agreements
• Sign power purchase agreements (PPAs)
• Arrange project financing
• Procure equipment and contractors

Since many projects in development ultimately never reach construction, this means that selling a solar lease at this stage is generally not a viable option.

Construction Phase

Once construction begins, your option agreement typically transitions into a formal lease. Consequently, this stage presents an excellent opportunity for selling a solar lease due to the following factors:

• Development risk is significantly reduced
• Construction typically completes within 12 months
• Lease payments often begin soon
• Buyers can accurately assess the asset’s value

Operating Phase

In general, the operating phase of a solar farm typically presents the lowest risk. This is because:

• Regular rent payments have already started
• Development and construction risks are completely eliminated
• Performance history is often available, providing valuable insights
• There is greater visibility into future cash flows

Two Ways to Sell Your Solar Lease

1. Fee Simple Sale (Land + Lease)

By selling your property together with the lease, you can gain the following benefits:

• Maximize total value
• Ensure a clean exit without future obligations
• Take advantage of clear capital gains tax treatment
• Avoid ongoing property tax or insurance responsibilities

2. Easement Sale (Lease Only)

Selling only the lease payments through an easement structure provides the following advantages:

• Retain ownership of the underlying property
• Rights revert back after 35-40 years
• Enjoy flexibility for properties with multiple owners
• You have the option to maintain control of unleased portions

How Buyers Value Solar Ground Leases

Lease Term Length and Payment Structure

When assessing value, buyers consider several key factors that influence solar ground lease pricing. Specifically, these include:

• Length of remaining lease term
• Annual rent payment amount and escalators
• Credit quality of project owner/operator
• Project size and performance history
• Location and overall market characteristics
• Property attributes and accessibility

In order to determine a fair purchase price, the solar lease buyer calculates the present value of all future lease payments.

Tax Benefits of Selling Your Solar Lease

Estate Planning Advantages

While every situation is unique and requires consultation with tax professionals, it is essential to recognize the potential financial advantages. More specifically, selling a solar lease can offer tax benefits:

• Potential capital gains treatment vs ordinary income
• Opportunity for 1031 exchange into other real estate
• Single tax event vs annual income taxes
• Estate planning benefits

Next Steps: Selling or Transferring Your Solar Lease

Therefore, if you’re considering selling your solar lease, partnering with an experienced buyer is essential. Ideally, look for one who:

• Understands solar project development
• Has significant transaction experience
• Can offer fair market value
• Can close quickly and reliably
• Provides flexible purchase structures

At Renewable Land, we help landowners maximize the value of their solar lease. If you are wondering how to sell a solar lease, our proven track record of successful transactions ensures a smooth process. In addition, with a confidential, no-obligation valuation, we guide you through the steps and present the best-selling opportunities.