The Anatomy of a Cell Tower Lease Buyout Transaction
Agreeing on a price and signing an LOI is the easy part of a cell tower lease buyout transaction. What happens next is a 3-to-5-month process in which the specific language of your Letter of Intent (LOI) will determine whether you actually get to closing — and how much you walk away with. Most landowners are not prepared for it. Here is what you need to know before you say yes to an offer.
Critical Success Factors for Your Sale
If you are getting ready to sell your lease, keep these four “North Star” principles in mind to ensure the transaction actually reaches the wire transfer:
01
The 4.5-Month Rule
We recommend not "counting your chickens before they hatch". Buyers typically promise quick closings- the reality is that the deal will likely take longer, especially if a public tower company is the buyer (or matches the ROFR).
02
LOI Over PSA
The deal is won or lost in the Letter of Intent. If the buyer won't agree to specific performance milestones and clear boundaries in the LOI, they will be even more difficult to deal with during the Purchase and Sale Agreement (PSA).
03
The CPA First Rule
You must evaluate tax consequences (Capital Gains vs. Ordinary Income) before the LOI is signed.
04
Bank Subordination (SNDA)
If you have a mortgage, your bank has a "veto" over your sale. Start the conversation with your lender early to avoid a surprise "pay-down" requirement at the closing table
Cell Tower Lease Buyout- Step by Step
Step 1: Negotiate LOI
Price, terms, exclusivity, milestones
Step 2: Sign LOI
No-shop clause activates
Step 3: Send ROFR Notice
If required by existing lease
Step 4: Await ROFR Response
Tower company has defined window to match
Step 5: Negotiate PSA
Purchase and sale agreement drafted
Step 6: Sign PSA
Formal purchase agreement executed
Step 7: Due Diligence Begins
Title search, environmental, site visit
Step 8: Resolve Diligence Issues
Title clouds, liens, lender approval
Step 9: Exchange Closing Docs
Deed, SNDA, assignment, closing statement
Step 10: Wire Transfer
Net proceeds received — permanent
What the Buyer Promises
45 – 60 days
What Actually Happens (Average)
120-150 days
01
How Long Will It Take?
Buyers routinely promise a 45-60-day close. It almost never happens. The average cell tower lease buyout takes 4.5 months from signed LOI to wire transfer. Buyers use the 60-day promise so you see dollar signs quickly and get you to sign before you have had time to think carefully.
And if your lease has a Right of First Refusal (ROFR)? Buckle up. If the lessee with the ROFR chooses to exercise, that can add months to the process, as some tower companies almost seem to be penalizing a seller who didn’t choose their own buyout offer up front.
Beyond the timeline, know who you are dealing with. Some buyers make high offers, but then take 6-8 months to close a transaction. Weeks will pass between updates or redlines from your attorney to theirs. Most buyers make it easy to sign the LOI, but not all make it easy to get to closing. Buyers know that you, as a seller, are vested and do not want to start anew with a different buyer.
Ken’s Bottom Line: The key is knowing who you are dealing with and their track record. Not what they tell you, but what they actually do. The battle is partially won or lost before you sign the LOI. We help you maximize your chances of getting a great deal done quickly.
02
The Letter of Intent: Where the Deal Is Really Made
Most landowners treat the LOI as a formality and save their negotiating energy for the Purchase and Sale Agreement (PSA). That is a mistake. By the time the PSA is drafted, the clock is running, you are locked into a no-shop clause, and the buyer’s attorneys are writing terms that favor the buyer — not you.
The LOI is where the legal stage is set. Price, term, exclusivity period, performance milestones, revenue share scope, easement boundaries — if it is not addressed in the LOI, the buyer will assume the answer favors them.
Ken’s Bottom Line: Never sign an LOI until you have a copy of the purchase and sale agreement (or easement purchase agreement) in hand. Review your lease carefully with your attorney (or ask for our help) and make sure the LOI includes clear buyer obligations that mirror those in your lease.
03
What Happens During Title Review (and Why Deals Stall)
After the LOI is signed, the buyer will conduct a thorough title search. They are looking for anything that clouds ownership — old utility easements, unsatisfied liens, or mortgages that were paid off years ago but never formally discharged at the county. The last one is more common than most people expect. An open mortgage from 20 years ago will not reduce your price, but it can stop a closing entirely until it is resolved.
Ken’s Bottom Line: If you have an old title report, provide it to the buyer. It will help expedite the transaction. In the interim, have your attorney review it and ensure there are no encumbrances
04
The Right of First Refusal
If your lease includes a Right of First Refusal, you must send the signed LOI to the tower company or carrier. They will have a defined window to match the offer. The structure of the LOI matters here. If the language is vague, the lessee will interpret the match in whatever way benefits them. A ROFR that allows the lessee to match only on a pro-rata portion of the property is particularly dangerous — it can strip significant value from your transaction.
One thing many landowners don’t know about ROFRs is that some lessees rarely exercise the ROFR but will try to assign the right to buy the lease to third-party lease-buyout companies. Those buyout companies will turn around and give the lessee (like AT&T) a favorable long-term lease agreement in return, or pay them a lump sum to “waive their right” to the option to purchase the lease.
Ken’s Bottom Line: At the risk of beating a dead horse, properly drafting and redlining the LOI is critical. Even if you choose to sell without SITA’s assistance, you should absolutely have your attorney review the LOI, your lease, and the proposed purchase and sale agreement before signing anything.
05
Your Mortgage Lender Has a Say
If your property is mortgaged, your lender, in most cases, has a prior interest in the lease income. You will need their approval to complete the sale, typically in the form of an SNDA (Subordination, Non-Disturbance, and Attornment Agreement). Some lenders are cooperative. Others move slowly or require certain conditions.
The condition that catches landowners most off guard: some banks will require you to apply a portion of the sale proceeds to pay down your mortgage balance before they will sign off. If you are counting on the full wire transfer for another purpose, find out before you sign the LOI—not at the closing table.
Ken’s Bottom Line: Do not wait to have the conversation with your lender about what they will require to sign off on the SNDA. More than likely, they will want to see the LOI and PSA.
06
Tax Treatment: Have This Conversation Before You Sign Anything
The difference between paying ordinary income tax rates and long-term capital gains rates on your proceeds can easily amount to a significant sum, depending on the size of the transaction. Most of our clients have been able to treat buyout proceeds as capital gains, but the structure of the transaction matters — and the time to address it is before the LOI is signed, not after.
Generally, the more a lease buyout looks like a permanent sale of property rights, the better. The IRS has issued private letter rulings regarding the sale of easements with terms exceeding 30 years that may support similar capital gain treatment in your situation.
For churches, the sale of lease income is more complicated. The key is to ensure it is not treated as unrelated business taxable income, which can be taxed at regular income tax rates even though the church is a not-for-profit entity.
If you are considering a 1031 exchange to defer taxes by reinvesting proceeds, the documentation requirements are strict, and the timing windows are unforgiving. You will need either a Qualified Intermediary or a CPA who has handled similar transactions to be involved from the beginning.
Ken’s Bottom Line: Some lease buyout companies will readily try to give you tax advice or claim that taxes aren’t an issue in the hopes of getting you to sign the LOI. Talk to your CPA prior to signing any LOI.
07
Once It Closes, It Is Permanent
When the wire hits, the transaction is done. The easement or assignment is recorded. That revenue stream is gone — not for the remaining lease term, but permanently, for every renewal period the lease could ever have run.
Some landowners assume they can unwind a deal later if circumstances change — if they want to develop the property, if the lease turns out to be worth more than they realized, if a better offer comes along. They cannot. Ever.
The decision to sell a cell tower lease or cell site lease is one of the most permanent financial decisions a property owner can make. Make sure the deal is right before you sign anything.
Ken’s Bottom Line: The proper time to evaluate the long term impact of the sale is before you sign the LOI.
08
What Happens After Closing
As part of the closing process, the buyer notifies the wireless tenants that they now control the lease. They start the process to transfer rent payments. Typically, the first two rent payments after closing will come to the seller as it takes two months for the transfer to occur. If the seller still gets rent payments after that, they will need to send them to the buyer.
Many people think that they no longer have to deal with the cell tower after a buyout. That’s typically not the case. You still have the same obligations under the lease to allow the tenant on the property, maintain the property, and pay your property taxes.
09
How SITA Helps
By now, you probably think we sound like a broken record about the LOI. But after closing $100M in cell lease buyout transactions for our clients, we have learned how to ensure our clients get their deals done the right way. And that starts BEFORE you sign the letter of intent, not after.
Don't Let the LOI Be the Last Mistake You Fix
We broker buyout transactions from first offer to wire transfer. Let us help you make sure you get the best legitimate offer.
If you are still trying to determine whether you should sell, contact us for a free initial discussion.