When is an airport lease not a lease?

Bill Dunn_0.png By Bill Dunn

We’ll get to that question in a few moments. But first, let’s have a brief discussion about leases.

When it comes to leases for uses of airport properties, they come in a wide variety of formats and page lengths. I’ve seen leases that are just a few pages in length and others that read like a book. Leases can and do cover a wide range of activities on an airport from FBO facilities to aircraft tie-down spaces on the airport’s ramp. And if the airport is publicly owned with a “risk management” department, it can get really interesting.

So what is a lease? It’s a contact renting land, buildings, etc. to another; a contract or instrument conveying property to another for a specified period or for a period determinable at the will of either party in consideration of rent or other compensation.

When one thinks of real world leases, one normally would see terms of 1 year or more, but unless the lease is for an FBO building or some other large capital investment, most airport leases for hangars and tie-downs are by no means long-term in nature. It’s not unusual to see these tenancies limited to 30-days with no guarantee of renewal.

When it comes to tenant constructed improvements like hangar construction on land leased from the airport sponsor, it’s become a common practice for airports to establish the term of the lease based on the dollar level of the improvement made to the leasehold. These types of leases may have lease lengths ranging from 10 to 50 years. But, the FAA will object to anything over 50-years in length. Also common are provisions in the lease that essentially turn the asset over to the airport after the term of the lease and any lease extensions expiring. And, if you want to construct a “hangar home” on a publicly funded airport, forget it!

So what’s the FAA’s role in all of this? A bit confusing to say the least. The Agency’s Airport Compliance Handbook (Order 5190.6b) very clearly says that the Agency does not “approve” leases. Yet, if an airport sponsor asks the Agency to review a lease, the Agency will review the document to determine if there are any potential violations of Federal Grant Assurances and whether the fees charged are actually fair market value.

When is an airport lease not a lease? When it’s a license, something more airports are implementing. But that’s another topic for another column.

Need assistance sorting through all of this? Give us a call at 913-498-9393 or write to me at BDunn@avstrat.com.

Bill Dunn is the President of Aviation Strategies. Prior to his retirement in December 2014, Bill served 23-years as Vice President of Airports at the Aircraft Owners and Pilots Association (AOPA). In this capacity, he served as the Association’s lead advocate for General Aviation airports. You can reach Bill at 913-498-9393 or BDunn@avstrat.com