Hey everyone,

I tried searching through the forum so I apologize if this has been covered in detail before.

I have been talking with a guy here on my home field about a partnership in his plane. He has said he isn't really looking for a partnership in it, but he would be willing to lease out some time to me. I'm unfamiliar with how this would work and I'd like to work out a deal in the best interest of both of us so I want to get a little information before we just start throwing out numbers.

I understand having partial ownership and sharing costs, or club aircraft with monthly dues etc... But, if I'm not buying into the equity of the plane, by him "leasing" out flight time to me, do we just set an agreed upon per hour rate that I pay him? Is it monthly due/per hour? Or is it all completely up to the agreement between the two of us? What's best?

Also, is it better to be a named on his insurance or get my own insurance?

I will of course get everything in writing if we decide to do this. But I guess I'm just looking for your guys thoughts on how to do this without getting myself screwed, or screwing the airplane owner.

Thanks!

Well I'm sure there are a million variations on this. In my case I considered that my plane has some hours it is available and considered taking on a partner. I asked about asymmetrical partnerships on this forum and another one. The overwhelming majority thought I would be crazy to take on a partner if I didn't need one (and I didn't). I didn't want to sell major shares and end up owning 1/4 of a plane and be voted off the island by my "partners". Anyway, I set aside the idea and remained a sole operator.

Along came a hangar neighbor who was flying daily, working on his commercial/multi, and was tail wheel endorsed. I sold him a share of my plane for $1. I have a spreadsheet which calculates my hourly costs and provided him a dry rate (discourages use of "rental power"). He paid me for a block of 30 hours in advance, and I used the money to install my Stratus ADS-B transponder.

I added him to my insurance. I had to provide something like 3 hours of dual and 10 landings for the insurance company. Adding him was not as expensive as I thought it would be (the prorated chunk for that first year was like $80). He paid that.

He has a key to my hangar. There's a dispatch book on the bench and a white board to leave notes. The plane is to be parked full of gas.

He has taken good care of the plane and there have been almost zero dispatch conflicts. I reserve the right to buy his share back for $1. I suppose he could sell his share for 1/30,000 ownership equity but I don't see much risk there.

As a retired "swear" word, the KISS principle should be used. Just rent the plane for an amount that covers your hourly costs and some profit or a reserve fund. Make sure the renter gets renter insurance. Make sure you know the renter and his ability to fly. Additionally I would incorporate the plane as a business for some Additional marginal liability insurance.

aftCG wrote:
He has taken good care of the plane and there have been almost zero dispatch conflicts. I reserve the right to buy his share back for $1. I suppose he could sell his share for 1/30,000 ownership equity but I don't see much risk there.

If you were concerned with that - him selling it to some wanker - you could handle it with a clause that you get right of first refusal if he wants to sell his share, and that if you decide not to buy it, majority of the ownership as to approve any new owner.

Basically you would get first crack at buying his 1/30000 share back, and if you didn't you would have to approve the new 1/30000 owner to weed out any wankers.

AlaskaPilot wrote:Hey everyone,

I tried searching through the forum so I apologize if this has been covered in detail before.

I have been talking with a guy here on my home field about a partnership in his plane. He has said he isn't really looking for a partnership in it, but he would be willing to lease out some time to me. I'm unfamiliar with how this would work and I'd like to work out a deal in the best interest of both of us so I want to get a little information before we just start throwing out numbers.

I understand having partial ownership and sharing costs, or club aircraft with monthly dues etc... But, if I'm not buying into the equity of the plane, by him "leasing" out flight time to me, do we just set an agreed upon per hour rate that I pay him? Is it monthly due/per hour? Or is it all completely up to the agreement between the two of us? What's best?

Also, is it better to be a named on his insurance or get my own insurance?

I will of course get everything in writing if we decide to do this. But I guess I'm just looking for your guys thoughts on how to do this without getting myself screwed, or screwing the airplane owner.

Thanks!

Seems like the responses so far have gone sideways from what you asked.

I'd keep the "Arrangement" as simple as possible, but make absolutely certain you are covered.

As to insurance, I'd get in touch with his insurance carrier, and ask THEM whether you'd be better off getting your own insurance, or being added to his insurance. Remember, your bank account is what you want to protect. Make certain there's no way his insurance could subrogate against you.

I'd make absolutely everything else was in writing, and notarized. Might even be a good idea to have a lawyer look at the agreement. There are things that an insurance company aren't going to cover.....like paint scratches, minor dings, etc, that can if nothing else create a lot of angst in this kind of arrangement. So, figure that out in advance. If it were me, I'd want all that stuff covered by his "rental rate" to you. If he sees some minor ding.....the conversation to follow SHOULD be already settled.

Sounds like you might be able to get into a nice situation. Make certain you're covered., and take care of his airplane as if it was your own....

MTV

AftCG and MTV, Thank you so much for your responses! That's exactly what I was looking for. I never even thought of little dings and "hangar rash" etc... and I know he wants to make some avionics upgrades so maybe I could buy in a block of time to help with that.

I was definitely planning to have a lawyer look stuff over for me (helps to have a contract lawyer as a friend!) and I would absolutely take care of his plane, probably better then I would take care of my own, I'm not one to use and abuse other peoples generosity and a firm believer in leave it better than you found it.

Thanks guys, keep it coming! What else can people think of.

corefile wrote:

aftCG wrote:
He has taken good care of the plane and there have been almost zero dispatch conflicts. I reserve the right to buy his share back for $1. I suppose he could sell his share for 1/30,000 ownership equity but I don't see much risk there.

If you were concerned with that - him selling it to some wanker - you could handle it with a clause that you get right of first refusal if he wants to sell his share, and that if you decide not to buy it, majority of the ownership as to approve any new owner.

Basically you would get first crack at buying his 1/30000 share back, and if you didn't you would have to approve the new 1/30000 owner to weed out any wankers.

I was really tongue in cheek about that part. There's no risk of him selling his non equity share. For him to have standing his name would have to be on the FAA paperwork or show some contract paperwork which doesn't exist. All I need to do to terminate is throw a dollar bill at him.

On that note
To paraphrase someone who responded when I asked about partnerships, if you have to get a lawyer involved then it's not the right partnership. Maybe you guys fly more expensive planes than I do, but a lawyer wouldn't have to have lunch with another lawyer very many times before the value of my aircraft was entirely consumed. Might be a different story if it was a six figure plane with multiple A type personalities who are strangers.

Insurance.
You can't get insurance on a plane you don't own. Been there. I fly a warbird owned by my uncle who doesn't fly. To insure the plane I have to do the leg work, make the phone calls and have the policy drafted. The policy has to be written to name me as the pilot and exclude him as the pilot, then he has to sign the paperwork (and I have to pay for it). It's a mess.

If it were possible to insure planes I don't own there are a few at my airport that would be a great short investment.

Last time I looked at renters insurance all it did was cover the other guy's deductible, and possibly some lost revenue. No wonder it's cheap. Also, if someone could get their own policy what is to say they keep it up while flying your plane?

Easiest for me was to be above board, add him to my policy and know that my plane is covered until next year. And like I said, adding him was surprisingly cheap (less than any renter's policy).

Consider that leasing or renting an airplane is a commercial purpose, and may create a situation for the other party in which he could be required to have commercial insurance or 100 hour inspections, for example. These kinds of arrangements sometimes attract attention from authority, and rarely in a good way.

If you want to make it formal, consider an asymmetric partnership of an aircraft owned by an LLC. You and the owner would be better
shielded from each party's respective liability. Insurance would be purchased in the name of the LLC, with each of you as a named pilot.

You could purchase whatever equity you wanted ($1) and pay whatever contracted amount you thought was reasonable for fixed and variable expenses. You could offer a damage deposit ($1000?) that would cover hangar rash if it happened, and was returned when you ceased the arrangement if nothing needed fixing.

Way back when I owned airplanes, anyone buying me lunch would make it a commercial operation according to ABQ GADO. I had no problem with the single seat Pawnee and single seat CallAir. In the people airplanes I didn't instruct in, I bought everything. In those I instructed in, commercial operation. Hopefully that has changed.

jcadwell wrote:Consider that leasing or renting an airplane is a commercial purpose, and may create a situation for the other party in which he could be required to have commercial insurance or 100 hour inspections, for example. These kinds of arrangements sometimes attract attention from authority, and rarely in a good way.

If you want to make it formal, consider an asymmetric partnership of an aircraft owned by an LLC. You and the owner would be better
shielded from each party's respective liability. Insurance would be purchased in the name of the LLC, with each of you as a named pilot.

You could purchase whatever equity you wanted ($1) and pay whatever contracted amount you thought was reasonable for fixed and variable expenses. You could offer a damage deposit ($1000?) that would cover hangar rash if it happened, and was returned when you ceased the arrangement if nothing needed fixing.

Good points in there. I wanted to avoid the word "renting" by selling the $1 share. And I did wake up in a sweat one night thinking about the 100 hour thing, but as it turns out we flew exactly 100 hours this year (I flew that hour the day before the annual turned into a pumpkin).

Benefits of an LLC vary depending on which state you reside in. Could be a consideration if your assets extend beyond a beater plane (mine don't).
A damage deposit is probably a great idea.

aftCG wrote:

corefile wrote:

aftCG wrote:
He has taken good care of the plane and there have been almost zero dispatch conflicts. I reserve the right to buy his share back for $1. I suppose he could sell his share for 1/30,000 ownership equity but I don't see much risk there.

If you were concerned with that - him selling it to some wanker - you could handle it with a clause that you get right of first refusal if he wants to sell his share, and that if you decide not to buy it, majority of the ownership as to approve any new owner.

Basically you would get first crack at buying his 1/30000 share back, and if you didn't you would have to approve the new 1/30000 owner to weed out any wankers.

I was really tongue in cheek about that part. There's no risk of him selling his non equity share. For him to have standing his name would have to be on the FAA paperwork or show some contract paperwork which doesn't exist. All I need to do to terminate is throw a dollar bill at him.

On that note
To paraphrase someone who responded when I asked about partnerships, if you have to get a lawyer involved then it's not the right partnership. Maybe you guys fly more expensive planes than I do, but a lawyer wouldn't have to have lunch with another lawyer very many times before the value of my aircraft was entirely consumed. Might be a different story if it was a six figure plane with multiple A type personalities who are strangers.

Insurance.
You can't get insurance on a plane you don't own. Been there. I fly a warbird owned by my uncle who doesn't fly. To insure the plane I have to do the leg work, make the phone calls and have the policy drafted. The policy has to be written to name me as the pilot and exclude him as the pilot, then he has to sign the paperwork (and I have to pay for it). It's a mess.

If it were possible to insure planes I don't own there are a few at my airport that would be a great short investment.

Last time I looked at renters insurance all it did was cover the other guy's deductible, and possibly some lost revenue. No wonder it's cheap. Also, if someone could get their own policy what is to say they keep it up while flying your plane?

Easiest for me was to be above board, add him to my policy and know that my plane is covered until next year. And like I said, adding him was surprisingly cheap (less than any renter's policy).

I don’t know what insurance company gave you that “information”, but it’s total horse pucker. There are all kinds of “Non Owned aircraft insurance policies out there. ANY reputable brokerage should be able to set that up for the kind of deal he’s talking about. I’ve always recommended folks renting airplanes buy non owned insurance.

And, non owned insurance only covers the owners deductible? Seriously? I can introduce you to a gent whose non owned aircraft policy bought a very nice Super Cub, and boy was he glad he had it.

The owners insurance insures him (and yes, you if you’re a named insured) if he HAS insurance, but a non owned policy insures YOU.

MTV

You will want to be named on the insurance policy to avoid subrogation if you end up bending the airplane.

You can definitely be named as an insured party on a policy for an aircraft you don't own. Happens all the time.

I usually carry $80-100k in non-owned hull, as I sometimes rent and sometimes am privileged to borrow friends' airplanes.

I hadn't thought or heard about the subrogation though. Why would that be a thing if the non-owned is the primary claim? Is the scenario you're talking about where the non-owned policy carrier goes after the aircraft owner's policy?

Yes, being named on a policy for the aircraft being covered prevents the insurance company from fixing the plane and then coming after you to recover damages.

Aryana wrote:Yes, being named on a policy for the aircraft being covered prevents the insurance company from fixing the plane and then coming after you to recover damages.

I don't follow, but TBH I've never had to test this process. If I wad a buddy's airplane, does the claim have to be to his owner policy? If I make the claim to my non-owned ("hey I bent an airplane...") who is going to subrogate?

If your buddy has a policy and let's you fly PIC in his plane under the open pilot clause and you have a mishap that causes damage.

Even though you meet the open pilot requirements on the policy, if you were at fault for the mishap the insurance company can come after you to recover.

Being additional named insured on your buddies policy can protect you from that.

https://air-pros.com/what-is-a-waiver-of-subrogation/

I'm not an expert on this by any means. Everything I know about this is from one case of someone at our airport getting chased down by an insurance company after totaling their buddies borrowed airplane that had full (hull) coverage.

From what I've been told, becoming a named insured on a friends policy has the same effect/protection as a waiver of subrogation described in the link above.

I just don't borrow anyone's airplane (even if they have full coverage) to avoid the potential liability if I blow it.

I think we're still discussing this under the assumption that a claim is being made to the owner's policy. Maybe that's appropriate for the OP's question.

But I always carried a non-owned policy that was meant to cover the full loss, not be a gap insurance or secondary policy of some sort.

Can you make a claim only to the non-owned policy and not the owner's policy?

Question for the insurance folks on here... I read somewhere that even being a "named insured" on the owner's policy does not completely eliminate the risk of subrogation. That article (wish I could remember where I read it) said you need to have the policy specifically state that the insurer waives subrogation to that named pilot.

It sounded crazy to me when I read it (and still does), but this discussion re-kindled the question in my mind, which I thought was germane to this discussion, as well. So what say the insurance experts?

Thanks in advance!

mtv wrote:
I don’t know what insurance company gave you that “information”, but it’s total horse pucker. There are all kinds of “Non Owned aircraft insurance policies out there. ANY reputable brokerage should be able to set that up for the kind of deal he’s talking about. I’ve always recommended folks renting airplanes buy non owned insurance.

And, non owned insurance only covers the owners deductible? Seriously? I can introduce you to a gent whose non owned aircraft policy bought a very nice Super Cub, and boy was he glad he had it.

The owners insurance insures him (and yes, you if you’re a named insured) if he HAS insurance, but a non owned policy insures YOU.

MTV

My apology for the fake news. I think in my case the issue was that the owner (my uncle) did not have any insurance in place. They were not willing to write a non-owned policy on an otherwise uninsured plane. Maybe it was just that broker, or possibly it was complicated by there being less underwriters for warbirds (like almost none).