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Understanding and Negotiating the Airport Lease

by Greg Reigel 1. June 2004 00:00
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Failure to understand the terms and conditions of an airport lease could leave you out in the cold. Careful attention to some of the following lease provisions can protect you.

Lease Term. This provision deals with the duration of the lease. Specifically, you need to know when the lease actually starts. This may be important when new construction of a hangar, building or other improvements are involved which may prevent your use of the property until the work is completed. To obtain the fullest use of the property, you may want the actual lease term to begin when construction is completed rather than making lease payments during construction even though you do not have full use of the property.

It is also important to understand how long the lease will run. Is the lease month-to-month or for a set number of months? Further, is the lease renewable? If so, will it renew automatically or must you exercise the option of extending or renewing the lease? If you must exercise an option, make sure you know how far in advance of the lease's termination you must give notice that you are extending or renewing the lease.

Knowing the potential duration of your lease becomes especially important in situations where the lessor does not have an obligation to renew or extend the lease. If the lease does not provide otherwise, a lessor could have the ability to not renew or extend a lease even after you have invested in the lease by building a hangar or other improvements on the property. Although this may seem unfair, the language of the lease will govern your rights. Thus, understanding this information up front is essential because it will allow you to assess the financial feasibility of recouping any investment you may wish to make in the property or a hangar during the lease.

Use of the Property. The use provision details the types of activities for which the property may be used. Make sure the terms of the lease allow you to use the property the way you have planned. This will require determination of your goals and intentions during the lease term. If you plan to sub-lease part of the space to another aircraft owner or intend to run a specific type or types of business from the property, you will need to ensure that the lease allows your intended use. This may be done with language which specifically allows your intended use, or with general language that will allow a wider variety of uses, including your intended use.

After you sign the lease, if the language of the lease does not allow your use, your desired use may only be possible by obtaining permission from the lessor. It is much easier to include the appropriate language in the lease prior to signing, rather than attempting to change the lease or obtain the lessor's permission after the fact. Thus, you will need to have a good idea of how you intend to use the property both at the beginning and throughout the term of the lease.

Buildings and Construction. If your are leasing property without a hangar or buildings and you intend to have the hangar, buildings or other improvements constructed yourself, you will need to make sure the lease protects this investment. First, you will want the right to remove the hangar, buildings or improvements from the property upon termination of the lease. Although this may not provide you with the full value of your investment in the property, it will allow you to recoup some of your equity.

If you are financing any of the construction, the bank or other source of financing will probably want the ability to mortgage or otherwise use the improvements as security for the financing. The lease will need to allow this. If you are arranging financing prior to signing the lease, you may wish to provide the bank or financing source with a copy of the proposed lease to confirm that the lease allows them to protect their financing.

Rent. The lease will invariably provide a set monthly or annual rental payment for the property. This is often referred to as base rent. However, this is not the bottom line for what the lease will cost. Additional fees that increase and can exceed the base rent include assessments, taxes and license fees to name a few. It is imperative that you determine up front what additional fees for which you may be responsible and precisely how those fees are calculated. Depending upon the total of the additional fees, you may be able to negotiate the base rent amount or other terms of the lease.

Similarly, if the lease provides the lessor with the ability to raise or decrease the rent, be sure to understand when this can happen and upon what such a change is based. Although you may not be able to control whether or not an increase or decrease in the rent is imposed, by understanding the circumstances upon which this change may take place, you will be able to plan for and possibly forecast this change in rent. This knowledge allows you to plan in such a way to either limit the effect of an increase, or take advantage of a decrease.

General Provisions. In reviewing the lease, make sure the lease refers to parties consistently. Names of persons or entities should be spelled correctly and where used should refer the appropriate party. If the lessee will be a business entity, such as a partnership, corporation or limited liability company, the lease will need to refer to that entity as the lessee and not to you individually. To the extent that you as an individual are required to sign the lease, you will want the lease to refer to you in your capacity as an officer, manager or partner of the particular entity who is the lessee. However, if a personal signature is required as an additional lessee or as a guarantor, even though this distinction may still be required, it may ultimately be immaterial to your personal liability under the lease.

Finally, it is essential that you carefully review all of the provisions of any airport lease before you sign. Consultation with an experienced aviation attorney beforehand can help you protect your business. By taking the time to understand the airport lease you are signing, you can avoid being left out in the cold.

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Greg Reigel | Airports

Surviving the Ramp Check

by Greg Reigel 1. June 2004 00:00
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You are standing on the ramp performing a pre-flight inspection. A man who you have never seen before approaches you and starts chatting about the weather and asking you questions: "What's your name?", "Where are you going?" etc. How do you respond?

First, know who you are talking to. Ask for the person's name. Find out what he or she is doing there. In this post 9/11 era, knowing who is at the airport and what they are doing is good practice and prevention. This is the premise of AOPA's GA Secure program. Second, if the person is an FAA inspector, you want to find that out as soon as possible. If he or she is, ask to see his or her FAA Identification card.

During the course of a ramp check, the FAA inspector will ask to inspect/review a number of items. Some of those items and how you produce them for the FAA inspector are discussed below. Quite a bit of this is common sense. Much of it is information all pilots learned, or should have learned, when they learned how to fly.

Personal Documents

When you fly an aircraft, you must have certain personal documents in your possession. You must have your airman certificate and it must be appropriate to the aircraft and type of flying you are doing. You must also have your medical certificate. It must be the original certificate issued by your Airman Medical Examiner and it must also be current and appropriate to the type of flying you are doing. Finally, in the aftermath of 9/11, you must also have in your possession a drivers license or other government issued ID containing your photograph.

Logbook

Next, the inspector may ask to see your flight logbook. I advise pilots not to bring their logbook with them when they are flying. Why? Two reasons: One, if you bring your logbook with you and it is destroyed if you are in an accident, you won't have any documentation to prove your flight time and currency. This can raise potentially ugly issues not only with the FAA, but also with your insurance company if they question your currency at the time of the accident and deny coverage. To avoid the insurance coverage issue, if you must bring your logbook with you I suggest you keep a photocopy of your logbook at home or in some other safe place.

Aircraft Documents In The Aircraft

Similar to the requirement that you have certain personal documents in your possession, the aircraft you fly also needs to contain certain documents. The inspector may want to review the aircraft documents during the ramp check. However, an inspector cannot inspect the interior of your aircraft without consent. Consequently, rather than giving consent, I recommend that you personally remove the requested documents from the aircraft and give them to the inspector.

You may need to supply the aircraft's registration certificate. Make sure the N-number on the certificate matches the N-number on the aircraft. Also, if you are operating with a temporary certificate, remember that it is only valid for 120 days. The aircraft's airworthiness certificate will likely be inspected as well. Here again, make sure the N-number on the certificate matches the N-number on the aircraft data plate.

Additional aircraft documents that are fair game during a ramp check include the operator/flight manual, or operating limitations if the aircraft is a homebuilt aircraft, and the aircraft's weight and balance information. For certificated aircraft, the weight and balance information should be in the manual. For homebuilt aircraft, this information will be contained in the aircraft's operating limitations.

Charts

Since a pilot is required to be familiar with all available information for each flight, an inspector may also ask to see the aeronautical charts you intend to use on your flight. Make sure the charts you have in the aircraft or your flight bag are current and appropriate to your flight. This seems like a "no-brainer", but you would be surprised how many pilots are flying with sectional charts that are several years old or instrument approach plates that are more than 56 days old. From a compliance perspective and, more importantly, from a safety perspective, use current and appropriate charts.

Interacting With The Inspector

During the course of the ramp check, you can also take the initiative and ask the inspector questions. Ask the inspector why he or she suspects you and what information the inspector has that leads to his or her suspicion. You can also ask the inspector which FAR's you are suspected of violating.

If the answers to these questions indicates that a simple misunderstanding is present, you can certainly try to clarify the situation for the inspector. However, if it appears that the inspector's issues are more than a simple misunderstanding or if you do not receive adequate responses to your questions, do not volunteer any information to the inspector. Remain polite and respectful, but don't give the inspector any more information than is required.

Do not try to argue with the inspector. Very rarely will you win an argument with the inspector. On the contrary, an argument with the inspector will usually get you in deeper trouble. You will either provide the inspector with information that helps the inspector make his or her case against you or you will exhibit a "poor compliance attitude", or both. Don't do it. Discretion and respect will serve you better.

Most pilots will never find themselves in a ramp check, due to the minimal manpower the FAA has available for ramp checks. However, if you find yourself in a ramp check, it is survivable. Hopefully this information, along with the right attitude, will get you through it. As always, fly safe and fly smart.

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Greg Reigel



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