Considering welcoming a non-equity partner

[Browncbr1]

I’m wondering if the community has any experience and advice for non-equity partnerships,,... or I guess it’s really a dry lease ...    our utilization has gone down and it would be nice to have help on fixed costs...      I was thinking a monthly amount, plus an hourly amount.  

[Bob - S50]

Personally, I would require a fully refundable deposit of $5000 or $10,000.  If they damage the plane or fail to pay their monthly fees or hourly charges, then it comes out of their deposit.  If they are good stewards of the plane then they get all the money back when they decide to leave.

[Browncbr1]

8 minutes ago, Bob - S50 said:

Personally, I would require a fully refundable deposit of $5000 or $10,000.  If they damage the plane or fail to pay their monthly fees or hourly charges, then it comes out of their deposit.  If they are good stewards of the plane then they get all the money back when they decide to leave.

That’s a good idea. Thanks

[Boilermonkey]

I would think a  non-equity partner would simply pay a wet/dry rate and then share in the scheduled and non-scheduled expenses as they are incurred.  Asking for a deposit upfront is your call, or you might phrase it as a minimum operational balance that needs to be maintained by both partners.

I would have them sign an agreement with many of the terms that are in a equity based partnership agreement removing the transfer of ownership aspects.  As the equity owner you would reserve the right to terminate their partnership at any time and specify how any outstanding fees/refunds would need to be paid.  That way if they don't treat your airplane the way you want and are unable to resolve it, you kick them out.

If they damage the airplane...well that would be paid by insurance.  And yes, if that happens the lifetime value of the airplane is reduced, but I doubt many people would place a deposit for that scenario or be able to agree on what that amount would be.

 

[Cruiser]

when I was a non-equity partner we added up all the cost of operation and I paid an up front once a year sum for fixed costs like hangar, insurance, annual, consumables (tires, oil, etc) then I paid an hourly rate when I flew which included the engine reserve.

Owner paid all upgrades and items that added value to the airplane. Owner was responsible for maintaining an airworthy airplane. 

[gsxrpilot]

I have a dry lease arrangement with @Denver98 for my 252.

I understand the deposit angle, but my feeling is anyone I'd feel I needed a deposit from, I wouldn't want flying my airplane in the first place.

Scott is named on my insurance, and that is protection enough for me.

[RobertGary1]

16 hours ago, Bob - S50 said:

Personally, I would require a fully refundable deposit of $5000 or $10,000.  If they damage the plane or fail to pay their monthly fees or hourly charges, then it comes out of their deposit.  If they are good stewards of the plane then they get all the money back when they decide to leave.

They’d have to be on your insurance so I wouldn’t worry about damage. 
Insurance may be the biggest obstacle. If they think you’re making any money they want to charge you FBO rates. 

[Bob - S50]

8 hours ago, RobertGary1 said:

They’d have to be on your insurance so I wouldn’t worry about damage. 
Insurance may be the biggest obstacle. If they think you’re making any money they want to charge you FBO rates. 

Not all damage is covered by insurance.  They might operate the airplane improperly and cause detonation damage.  They might spill something on the seats and ruin them.  They might scratch the paint or window.  A deposit would be to cover the deductible or any other portion of damage that is not covered by insurance.  Then of course if you actually file a claim, your premiums will be higher if you are even able to get insurance.

[gsxrpilot]

16 minutes ago, Bob - S50 said:

Not all damage is covered by insurance.  They might operate the airplane improperly and cause detonation damage.  They might spill something on the seats and ruin them.  They might scratch the paint or window.  A deposit would be to cover the deductible or any other portion of damage that is not covered by insurance.  Then of course if you actually file a claim, your premiums will be higher if you are even able to get insurance.

True, in fact there could be times when you'd decide not to file a claim to avoid the knock on effect of getting dropped or an increase in premiums.

Certain items have to be considered normal wear and tear. And if that is of concern, don't let anyone fly your airplane.

For damage that falls in between insurance claims and the normal wear and tear, I stand by my original statement. If I didn't think the "partner" would immediately reach into his own pocket to cover any such damage immediately and without asking... he wouldn't be my partner.

[carusoam]

+1 on getting them added to the insurance...

Depending on their amount of recent Mooney experience, this number can be unusually large for some pilots...

Good luck finding a match...

Many MSers have long standing partnerships... they start to look like brothers after awhile... 

Best regards,

-a-

 

[RobertGary1]

4 hours ago, Bob - S50 said:

Not all damage is covered by insurance.  They might operate the airplane improperly and cause detonation damage.  They might spill something on the seats and ruin them.  They might scratch the paint or window.  A deposit would be to cover the deductible or any other portion of damage that is not covered by insurance.  Then of course if you actually file a claim, your premiums will be higher if you are even able to get insurance.

Yea I mean that’s what you’re signing up for when you add any type of partner or lease back. If you treat your plane like your precious baby you really shouldn’t get jnto such arrangements. Unless you want to find a like minded equity partner.