Negotiating a Lease Back Agreement

Scott F. Smith
sfsmith@oaktoninternational.com


 

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Buying a Used Single Engine Aircraft
Engine Research & Installation
Avionics Research & Installation
Air Frame Repair
Finding a Flight School
Negotiating a Lease Back Agreement
Insurance
Maintenance
Commercial Operations
Cash Flow Analysis
Conclusion

Negotiating a lease back agreement is simple and straightforward, but it can be intimidating to the first time owner with little negotiation experience. Many agreements I have studied are quite lengthy, but I am for short one page agreements like the following:

AIRCRAFT LEASE AGREEMENT

THE FOLLOWING AGREEMENT IS BETWEEN XYZ AVIATION AND ABC CORPORATION THE OWNER OF A 1968 C-150H AIRCRAFT FAA REGISTRATION NUMBER (TAIL NUMBER).

  1. AIRCRAFT OWNER AGREES TO LEASE AIRCRAFT TO XYZ AVIATION. MONTHLY LEASE PAYMENTS WILL BE CALCULATED BY THE MONTHLY HOBBS METER READING. LESS ANY HOBBS METER READINGS DUE TO NORMAL AND REASONABLE MAINTENANCE OPERATIONS. NON-MAINTENANCE HOURS FOR CALCULATION OF LEASE PAYMENT WILL BE CALCULATED UPON A RATE OF $65 PER HOUR.
     
  1. OWNER AGREES TO BE SOLEY RESPONSIBLE FOR MAINTENANCE, SERVICE, AND THE UPKEEP OF THE AIRCRAFT, INCLUDING FUEL, OIL, INSURANCE, AIRPORT TIEDOWN FEES, AND ALL MAINTENANCE EXPENSES. OWNER AGREES THAT THE AIRCARFT WILL BE AT ALL TIMES BE PROPERLY REGISTERED, MAINTAINED, AIRWORTHY, AND IN ACCORDANCE WITH THE RULES AND REGULATIONS OF THE FAA AND THE STATE OF OHIO. LEASEBACK REPORT WILL BE COMPLETED NO LATER THAN THE 15TH OF EACH MONTH. PAYMENT TO EITHER PARTY TO BE NO LATER THAN THE 20TH OF THE MONTH.
     
  1. OWNER AGREES THAT (TAIL NUMBER) WILL BE OPERATED IN ACCORDANCE WITH THE LIMITS OF LIABLILITY OF THE ABC AVIATION, INC. FLIGHT SCHOOL INSURANCE POLICY AND THAT XYZ CORPORATION WILL BE PROVIDED A CERTIFICATE OF INSURANCE FROM THE INSURANCE AGENCY INDICATING THAT OIC IS THE OWNER OF (TAIL NUMBER).
     
  1. THIS LEASE SHALL CONTINUE UNTIL TERMINATED. THE LEASE CAN BE TERMINATED BY EITHER PARTY FOR ANY REASON UPON 30 DAYS WRITTEN NOTICE TO THE OTHER PARTY.

OWNER:                  FLIGHT SCHOOL:

ABC CORPORATION         XYZ AVIATION,INC.                               

 

_____________________    _____________________

BOB JONES                TOM ARNOLD

President                President

 

__________________    __________________________

   Date                   Date

Once the leaseback agreement is completed, you have a foundation to do business with the flight school. Now it is just a matter of the Flight School and the Owner keeping there ends of the bargain.

The flight school is going to provide a Net Sheet each month that will look something like the following:

 

 

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