I finally have the option to buy a hanger...it's going to happen next month. I was looking for some general advice and had some questions before dropping the money.

1. As this is on leased land with a built structure on top of it there is no deed. How does someone go about ensuring there are no liens on the property when there isn't a title?
2. Anyone have ideas what insurance costs for a 60x60 hanger? Any company you'd recommend?
3. I'd like to rent to one or two people to help cover fixed costs. Do you know if I should have formal rental agreements or more hand shake method?
4. Does anyone have any example bills of sale they've used for hanger purchases?

Any other general advice before I launch into the unknown? Super pumped to finally have a hanger...wait list for city hangers here in Boise is crazy.

I assume it is on city property, need to know length of lease and renewal options, some cities own the hanger at the end of the lease. You need a written contract with sub renters.

I own a unit in a condo hangar on leased ground at the local oublic owned airport.
Technically it is a "leasehold condominium".
There is a deed, or title, or whatever you want to call it--
that's how the county collects property tax.
If Idaho has property tax, I would be surprised if there wasn't a (taxable) title of some sort.
I'd talk to a local escrow company re a title/lien search.

FWIW our condo consists of two buildings, totaling about 20,000 sq ft,
and our insurance cost last year was $2,078 --
that's for damage / replacement coverage and liability, with the airport operator named as an additional insured.

Renting out spots in it... I would not want to rent to anyone who I couldn't trust with a handshake deal.
IMHO a written lease agreement can work for you or against you.
I'd say go informal on a month-to-month basis, with the absolute right to terminate with short or no notice.

What hotrod said regarding talking to an escrow company to search title. I too "own" a T-Hangar (and, yes, the thing you store your airplane in is a HangAr, whereas a hangEr is what you hang your coat on) in a condominium association. Escrow company did title search.

Personally, I would never lease space in a hangar I owned. I've seen too many of these deals go sideways, and bear in mind that you're giving the keys to your "stuff" to someone, AND whomever he or she invites into your hangar. Like a lot of things, this can work, or not. The not is likely to be ugly. Someone dings one of your wingtips, moving airplanes around......who was it? Will they fess up and pay up? Etc.

As to agreements, I think you really, really need a written agreement. You might talk to your attorney about this. Handshake agreements work fine till they don't, and then, you might have trouble evicting them. What happens if they don't pay? You going to take the chance of moving their airplane, without their permission? What happens if something ugly happens to that airplane after YOU moved it?

Frankly, if you really need the income to pay the mortgage, maybe you're getting over your head. Or not.

Etc.

MTV

There is a LOT of liability that goes along with renting out a spot in your hangar. It may be your best buddy and he may never sue you but lets say for example, the hangar burns down, his insurance company will pay him for his loss but they may turn around and sue you and there is really nothing your loyal well intentioned buddy can do to stop them except not file a claim. If you do rent a spot out make sure you get a signed document from his insurance company that they wont sue you. I forgot what the clause is called but someone here will know what I am talking about. What if a guest of your tenant slips and falls or walks into the trailing edge of your Cessna and gets the Cessna tattoo on their forehead? Not a likely scenario but something to keep in mind. Also, remember, you have to report that rent as income which takes a chunk out of your revenue. Lots of things to consider when renting out a spot.

As far as buying, great! But do your homework. Owning your hangar is a great thing!

Kurt

Waiver of subrogation. Have each other listed as additional named insured on each other’s policies. If you’re one of the insured, the insurance company can’t sue you.

Pinecone wrote:Waiver of subrogation. Have each other listed as additional named insured on each other’s policies. If you’re one of the insured, the insurance company can’t sue you.

That’s it, thanks Pinecone!

Kurt

I can second the comments on ways that the deal can go sideways. Several years ago there was a hangar on our airport that had three planes in it, the owner's and two of his buddies'. One very cold winter day one of the "buddies" was draining fuel from his aircraft and static electricity ignited it. The hangar and all three aircraft were a total loss and what I heard was that there was no insurance on anything, which is not at all uncommon in Alaska.

Mike (MTV) and Kurt (G44) pretty much covered it! CYA is the rule!
I agree, been down the 'friend' or handshake path and it usually comes with pitfalls. I no longer will sub-lease or rent space where I have my plane or equipment stored.

I used to have a 50x50 at a large airport. I think one of the smartest things I did for insurance purposes was to add it to my homeowners policy (State Farm) and things were all well. The airport was happy, I was happy, and SF was happy. I never had a claim so I can’t tell you the down side.
As far as renting out spots all of the above is true. I didn’t rent spots out but when my hangar was occasionally empty the “fellows” would get pissed if I wouldn’t let them park in my empty space for “awhile”. Awhile to me and to you are very different timeframes. Also, where does it end if your hangar mates need to park a boat or motorhome inside for “awhile”.
I’m not saying don’t do it but if you do have it on paper and think of every scenario in advance. My 2 cents

All good points...two I have come across....insurance minimum requirements from airport and a prohibition on non aircraft storage...all of a sudden the Man Cave has reduced options...Second is the fellow I rented to who had a fetish about keeping his airplane warm...Upper Peninsula of Michigan...and ran a Tannis heater and a small ceramic heater in the cockpit full time...my electric bill went up $100 a month....!

You need to read the land lease agreement and have a conversation with the airport manager about the terms of the lease and its renewal options. Do not trust any word of mouth stuff such as "they always renew the lease for an x year term." If it isn't in the lease don't count on it happening even if the airport manager says it will.

I don't recall a deed or anything for the hangar we bought, just a lease agreement with the airport and the county gets a copy of that lease so they know who to send the tax bill to. Checking with an escrow/title company would be a good idea.

whee wrote:You need to read the land lease agreement and have a conversation with the airport manager about the terms of the lease and its renewal options. Do not trust any word of mouth stuff such as "they always renew the lease for an x year term." If it isn't in the lease don't count on it happening even if the airport manager says it will......

Another thing to look for is an escalation clause for the land lease and/or access fee--
ours is tied to the Dept of Labor's annual consumer price index,
usually 2-4% each year but over time it adds up.
Also check for a "rate adjustment" clause-- usually they mention something about "fair market value",
but the airport operator's idea of that may differ from yours by quite a bit.

All of this is super helpful. thanks everyone.

Do you think there is any value in purchasing the hangar under an LLC? Would that help protect someone in the event of a plane burning to the ground, etc.? Not sure if it's worth the hassle. I really need to figure out what that signed clause from the insurance company is called - that's a very good idea.

I didn't think about the hangar rent needing to be reported as income. If that's the case then maybe the LLC could be a legit business? Or I could just have people pay me in Amazon Gift Cards. Haha.

Airport states a new 20 year lease will be signed with option to extend another 10 years in 2040. That sounds pretty fair to me. Supply and demand around here is super tough and lord knows no new airports are getting built, so I feel like I need to act fast to secure this opportunity.

I'm sure my friends without storage for their birds also agree, as the list of interested rental parties keeps growing!

climbingnerd wrote:All of this is super helpful. thanks everyone.

Do you think there is any value in purchasing the hangar under an LLC? Would that help protect someone in the event of a plane burning to the ground, etc.? Not sure if it's worth the hassle. I really need to figure out what that signed clause from the insurance company is called - that's a very good idea.

I didn't think about the hangar rent needing to be reported as income. If that's the case then maybe the LLC could be a legit business? Or I could just have people pay me in Amazon Gift Cards. Haha.

Airport states a new 20 year lease will be signed with option to extend another 10 years in 2040. That sounds pretty fair to me. Supply and demand around here is super tough and lord knows no new airports are getting built, so I feel like I need to act fast to secure this opportunity.

I'm sure my friends without storage for their birds also agree, as the list of interested rental parties keeps growing!

Single proprietor LLC provides zero protection to personal assets. If you’re going into partnership with two others in buying the hangar, then an LLC MAY make sense, but only if the partnership is profiting from it.

Other question: In your airports lease agreement, what happens after 2040? Does the building revert to the airport ownership? That may seem like a long way off, but a) You May have trouble financing it with that reversion are covenant, and b) Unless you can basically pay for the building by leasing space in it between now and then (and don’t forget maintenance, ground lease and utilities in the meantime), that’s going to wind up being an expensive hangar. Note that I didn’t use the term “investment”, because at the end of the lease period you give the building to the airport.

So, if you’re thinking the building will increase in value, be certain there’s no reversion any clause, as hot rod pointed out.

Again, what happens in 2040?

MTV

climbingnerd wrote:….Airport states a new 20 year lease will be signed with option to extend another 10 years in 2040. That sounds pretty fair to me. Supply and demand around here is super tough and lord knows no new airports are getting built, so I feel like I need to act fast to secure this opportunity. ….

This is an existing building?
Depending on the purchase price, the return on investment might not pencil out for a 20 year lease.
If a 10 year extension to the 20 year lease is pre-approved for 2040,
I'd request that they just write your (new) lease for 30 years.

I understand that 30 years is pretty common for commercial land leases,
but the private hangars at my airport have all been on 50 year leases.
Not sure about the FBO & aero museum.