If you’re considering buying or selling an aircraft, working with an experienced aviation attorney to complete your transaction can help prevent costly and unpleasant surprises. Carefully drafted purchase agreements, co-ownership agreements, and lease agreements let you get the maximum possible benefit from your investment while complying with all applicable ownership and operational requirements.
1. Purchase Agreements
As a buyer, your purchase agreement should provide two key benefits:
- A comprehensive pre-purchase inspection. The pre-purchase inspection should be performed by the mechanic of your choice. Your mechanic should be someone who has never worked on the aircraft before and is located a reasonable distance from the plane’s current location.
- Unconditional refusal rights. You want to be able to walk away from the purchase if the inspection results reveal problems that you’re not willing to accept. Often, a standard broker’s agreement will only require the seller to fix items that are needed to make the plane airworthy.
If you’re the seller, the purchase agreement should allow you to accomplish two goals:
- Ensure you are promptly paid. This includes having the buyer deposit funds into escrow, as well as meeting specific deadlines for conducting the pre-purchase inspection and resolving any discrepancies.
- Minimize future liabilities. A common mistake sellers make with their purchase agreement is to represent that the plane is airworthy. This is the duty of the buyer’s mechanic, so you want to avoid making a claim that could leave you financially liable for future repairs.
Whether you’re the buyer or the seller, an experienced aviation attorney can help you draft a purchase agreement that protects your interests and lets you complete the transaction with confidence.
2. Co-Ownership Agreements
Co-ownership of an aircraft is common due to the cost involved, but this is a major purchase that comes with multiple variables to consider. For example:
- Where will the aircraft be based?
- What are the flight and scheduling limitations for each co-owner?
- Will you allow pilots other than co-owners to fly the aircraft?
- How will you handle payment of necessary maintenance expenses?
- How will you determine if upgrades are necessary and who will be responsible for the associated costs?
- What will your policy be for dispute resolution?
- Will you allow for a buy-out if one owner wants to sell their interest?
- What happens to ownership shares in the event of death or divorce?
Meeting with an experienced aviation attorney to draft a co-ownership agreement tailored to fit your specific needs is crucial. Clarifying the rights and responsibilities of all parties involved, as well as how you plan to address any obstacles you encounter, can prevent headaches down the road.
If you are planning to purchase an aircraft with two or more co-owners, it is best to avoid taking the title as individuals. Since individual ownership exposes you to the risk associated with a co-owner’s negligent actions, it is recommended that you use a Limited Liability Company (LLC) to create a “firewall” protecting your assets from the actions of your fellow co-owners.
3. Lease Agreements
When an aircraft is owned by a business and occasionally used by the owners for their personal travel, lease agreements must be clearly defined to avoid FAA regulatory problems. Some of the many potential questions that must be answered include:
- Will you be leasing the plane with or without fuel and oil?
- Are you leasing with pilot services and in need of a FAR Part 135 certificate?
- Do you want the lease to function as a temporary transfer of ownership giving control to the lessee or as a simple rental where the business maintains control?
As with co-ownership agreements, the best way to protect your rights and your investment is to meet with an experienced aviation attorney. Your attorney can ensure that the agreement protects both your business and personal interests while avoiding any potential issues related to FAA compliance.
Contact Steinberg Law, LLC Today
When you’re buying or selling an aircraft, non-aviation attorneys simply don’t know what questions to ask to ensure that your interests are fully protected. In addition to being a pilot for over 50 years, aviation attorney Frank Steinberg has served as president of the Lawyer Pilots Bar Association, chairman of the New Jersey Aviation Association, and president of the Mid-Atlantic Aviation Coalition. You can count on Steinberg Law, LLC to draft agreements tailored to fit your individual needs and designed to protect your investment while allowing you to make the most of your time in the air. Contact us today to request a free case review.