Can I get a sanity check on a hangar lease agreement?

[BlueSky247]

Hey Gang,

 

An opportunity has popped up out of the blue to do a thirty year lease on an open spot near me and build a hangar on it. It's at a nice little paved field that is county owned and seems well maintained. Besides me being deliriously stoked, the terms seem to be reasonable.

Before I jump on this, could I trouble you more experienced folks with these to scan this agreement and tell me if there's something off with it? (apologies for any weird text, I had to copy it out of a grainy scan.)

lease-text.pdf

[Z W]

You may want to consult a lawyer in the area where this is, before spending tens or hundreds of thousands of dollars on hangar construction.  A few thoughts:

1. Assignment is not allowed without their permission, meaning they can refuse to let you sell the hangar, for any reason or no reason.  You may want it to say they cannot unreasonably withhold their consent to assign.  Things change and you will want to be able to sell your investment.

2. The airport gets to re-adjust the rental amounts every 5 years.  You have some protection since it can only adjust the rates for everyone at the airport.  But you could spend a lot of money building, expecting $30/month for your ground lease, only to find they increased it to $2,000/month for everyone at the airport 5 years from now.  You don't know who will be in charge of the county airport board 5 or 10 years from now, or what ideas they may come up with to increase revenue by taxing those rich airplane owners buzzing the town with their private airplanes.

3. It's silent on cost of construction, and ownership/tie down rights, of the apron and ramp.  Usually that means you will pay to build it.  They may or may not let you park aircraft on it, or tie down aircraft on it.  In case that's important to you.

[BlueSky247]

@Z W Thank you! I will do that. Some of this doesn't jive with what I was told verbally and the airport manager wasn't able to tell me clearly what size I could build, other than to say "about a 45 by 45". I've walked by the hangars there and the construction styles and looks are very different. It's a rural county and certainly not a "hoity toity" area. 

[Rick Junkin]

If you haven't already, talk to one of the current hangar owners about how the lease is administered. Preferably find someone who has been there through a lease renewal. There is what is written in the lease, and then there is what actually goes on day to day. This can give you more insight as to what questions you or your lawyer might want to ask before signing, and help clear up the inconsistencies between what you were told and what is in the lease.

Cheers,
Junkman

EDIT: I own a hangar under a similar land lease agreement. Maintaining a good relationship and open communication with the airport manager is really important. I've heard about things going a bit sideways for folks who didn't take this to heart.

[philiplane]

sample_aeronautical_lease_dummy.pdf

[midlifeflyer]

3 hours ago, BlueSky247 said:

@Z W Thank you! I will do that. Some of this doesn't jive with what I was told verbally and the airport manager wasn't able to tell me clearly what size I could build, other than to say "about a 45 by 45". I've walked by the hangars there and the construction styles and looks are very different. It's a rural county and certainly not a "hoity toity" area. 

Work under the assumption that if what you were told verbally is different than what the lease says, what you were told verbally means nothing.  This is the time to clear up any questions - in writing.

[Z W]

Also, speaking from experience, it's not unheard of to be told the only building plans they will approve will be stamped, engineered plans that call for 9-inch thick concrete reinforced with #5 rebar every 12" on center, which must also be approved by the county engineer.

[Fritz1]

If you have an AOPA legal plan, contact AOPA and find out if one of their AOPA contract attorneys would be available to advise you. Maintenance has been contentious at my airport for a while, clearly state that you can perform owner maintenance on your airplane, clearly state that you can perform A&P work on your airplane if you are an A&P and now it really gets dicey, if so desired that A&Ps can perform work on other airplanes.  A buddy of yours might want to have an annual done in your hangar or God beware you might want to open a shop. The ability to do this kinda stuff determines the value of your hangar. I keep fingers crossed!

[BlueSky247]

Thanks All. I met with the airport mgr yesterday and toured the place. Measured out the newest neighboring hangar as well(50x40). Water and electricity are included and paid for currently by the county. A septic connection is something I would have to get together with the other folks in that hangar row and put in a request together for.

Turns out it really is a small world out there...

He's been the mgr there for over 20 years and he is also one of the area DPE's. He has an arrangement of reserved slots in his schedule for the flight school I am training with but is otherwise booked out for two months. Really down to earth nice guy. There's an A&P two doors down as well.  Everything seems very laid back with good security and maintenance. Runway has modern lighting, papi, ils and rnav approaches, self-serve fuel, nice pilot lounge building with showers, kitchen, etc. I'm waiting on a callback from my attorney but will reach out to the AOPA folks if I can't get an answer locally. My feeling is that the "teeth" in the contract is there for those cases where people turn the place into a storage dump. I had a funny idea that I could guarantee never getting booted due to the "always keep a plane in the hangar" clause by hanging an empty shell from the ceiling. 

 

I'm in the middle of trying to buy a plane, so I told him this won't be right away, but for sure asap. He said that would be no problem. 

[M20F]

44 minutes ago, BlueSky247 said:

Really down to earth nice guy.

And when he dies the next one maybe from Venus.  Get a lawyer to guide you. 

[1980Mooney]

@BlueSky247  It all sounds promising.

• What is the likelihood that you might move to another city in the near future?
  • My plane has been located at 3 airports over 25 years.
• Have you paid for an approved hangar design and gotten a construction quote before signing? As @Z W highlighted there may be some surprises in store with recent increased pricing of labor and materials.
• Are you financing?  If so, it could be advantageous to get an assignable loan.  That way if you need to sell the remainder of your 30 year lease and building, the buyer can assume the remainder of the mortgage simplifying the sale.

[PeteMc]

5 minutes ago, 1980Mooney said:

What is the likelihood that you might move to another city in the near future?

If it is a busy airport, my guess is that he may even make a profit even if he moved after only a few years. 

Just heard that a T hanger at SFF sold for $240K!  If that's true... Ouch! (But then it just helped my investment.)

 

[BlueSky247]

@1980Mooney I just left the big city about 3 years ago to move where I am now. I've landed in a low COL area and like it here. I have a handful of years until what passes for traditional retirement age, so I'm expecting to stay put barring some kind of major development.

 

I have a call in to the guy that built the most recent hangar. He's with a local building supply place. I am hoping to cashflow the hangar in stages, but we will see. My plan is to get the slab poured and get the shell put up. Internal mezzanine and things like that will be later on. My main goal to start with is just get it reasonably airtight and able to run a mini split when working in there.

[laytonl]

Many years ago I was a member of an airport authority and was in charge of developing lease agreements with tenants.  Our agreement was an initial term of 35 years with one 15 year extension after which the hangar, or any other improvements made by the tenant reverted back to the airport authority.  The agreement stated that the authority could increase the ground lease annually at a rate not to exceed the CPI-U, and the sum of increases was limited to a fixed dollar amount.  I believe the airport charges $0.05 per square foot of leased space.

IIRC, I developed our lease agreement based on an industry standard at the time (1990’s).

 Lee

[Ron McBride]

As a thought, the a&p a couple of hangers down.  Will his business have a plane or 2 blocking the taxi occasionally?

[BlueSky247]

Good question. These hangars aren’t that big. I think it’s more his personal space and not a working shop. 

[Pinecone]

You never know.  I know of one shop that is two T-hangars.  One is at the dead end so not a factor.

[BlueSky247]

All - I finally sat down with a local attorney today to review the lease agreement. He had a number of concerns with it and I will be addressing those with the airport folks when the time comes. I have this on hold for now until I finish the ppl and get the plane here. Hopefully both of those will be happening soon so that I can focus more on this.