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alpinelakespilot2000

Well Known Member
Am trying to buy a fellow EAA member's hangar. Picked up the new lease agreement offered by the county. The county is the "lessor." It includes this clause:

22. MODIFICATIONS OR TERMINATION: Lessee and Lessor agree that Lessor may, at Lessor's sole discretion, modify the terms of this lease in whole or in part, including but not limited to any term or condition of this lease, including cancelling the unexpired portion of this lease and re-letting the property to another tenant, in the event that any regulation governing airports or county property is amended in a way that impacts the Lessor's ability to lease, use, control, protect, or maintain the Property. For the purpose of this section, "regulation" is defined to include, but is not limited to: case law interpreting any rule or regulation; any federal rules and regulations, including Federal Aviation Administration rules and regulations; state rules and regulations; and local rules, regulations, and ordinances.

In the event that Lessor shall elect to modify or terminate this lease, Lessor shall do so only upon one hundred twenty (120) days written notice, notifying Lessee, at Lessee's address of record, that the lease to which this applied is being so modified or terminated.

Am I right to be concerned about plunking down a lot of money for a hangar that, if I read this right, could be stripped away if the county decided it wanted to plant more grass?
 
"in the event that any regulation governing airports or county property is amended in a way that impacts the Lessor's ability to lease, use, control, protect, or maintain the Property. "

That is what I take out of it There are plenty lawyers on here to answer this.
 
Will they accept a red line modification for consideration?

Basically if the airport commission or management organization loses control of the airport (bankruptcy, closing the airport, etc...) they can cancel the lease and re-let it to someone else. Its kind of a stupid clause in some regard. Seems the me the right of the Lessor to evict the Lessee is always a possibility regardless of this section. If the Lessor cant "lease, use, control, protect, or maintain the Property." then it sounds like a moot point.

You might want to ague the part about "any term or condition of this lease" and trim it down to the ones you dont want them modifying. Get them to add another 60-day on the notification, too. It will give you 6-months to find new digs.
 
I think it's intent was reasonable based on possible federal or state reg changes that they might have to adapt to. HOWEVER, the way it is written opens the door for the county themselves to propose regulation that could move you out.
 
Since you said "buy the hangar", I presume this is a ground lease for your building and not a lease of a county (or city) owned building.
 
az_gila said:
Since you said "buy the hangar", I presume this is a ground lease for your building and not a lease of a county (or city) owned building.
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Correct. I would own the building but lease the land.

I would pretty much have to destroy the building to take it with me, so if the county ever invoked this clause, my entire investment is pretty much gone. Hence my concern.
 
It doesn't sound fair to me. The lessor is protecting themselves and allowing themselves to break the land lease for possibly reasons you haven't even thought of - with no protection for your investment. Check out North Little Rock airport. Hangar owners there went through some turmoil when the City of North Little Rock decided to take over ownership of hangars that were owned by individuals. I'm not sure what the outcome was, but I believe their lease agreement allowed them to keep any improvements made to the leased land - like their hangars. The city wanted to take ownership of the buildings and then rent them back to the current owners! I have a similar lease agreement here in Ohio, and if they tried to do that here, I'm taking my hangar(s) with me. They'll be left with a piece of property with a slab on it.
 
Scott Hersha said:
It doesn't sound fair to me. The lessor is protecting themselves and allowing themselves to break the land lease for possibly reasons you haven't even thought of - with no protection for your investment. Check out North Little Rock airport. Hangar owners there went through some turmoil when the City of North Little Rock decided to take over ownership of hangars that were owned by individuals. I'm not sure what the outcome was, but I believe their lease agreement allowed them to keep any improvements made to the leased land - like their hangars. The city wanted to take ownership of the buildings and then rent them back to the current owners! I have a similar lease agreement here in Ohio, and if they tried to do that here, I'm taking my hangar(s) with me. They'll be left with a piece of property with a slab on it.
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I wouldn't leave the slab (in one piece). Rent a jack hammer and break it up before you leave.
 
As an airport manager for a city, we have similar language in our leases. Often it refers to the airport shutting down, losing funding, nation emergency and federal takeover. You lease probably also has language that you will have to return the land to clean and clear dirt upon the experation date at the lessors decision.

Depending on the governing agency (County), you will probably have a very difficult time changing that, as it will prob have to go to the board of supervisors, council and/or county attorneys office for approval or modification.

Realistically, you will prob be ok, because you have the power of PR and the media against elected officials. Politics do not like to look like they are picking off the little guy, and the news likes to report that.

Just food for thought
 
Scott Hersha said:
The city wanted to take ownership of the buildings and then rent them back to the current owners!
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This is a very common way smaller airports are built up (at the end of the lease term of course). Oftentimes the governing bodies do not have the capital to build hangars, so they offer a long term ground lease, have a developer build and rent out the new hangars, and take ownership of the hangars afterwards. By this time the hangars will be 25-30 years old and should be fully depreciated. Of course, a maintenance nightmare too.

Small airports rarely make a lot money, and the FAA does not provide funding for operating costs, so without landing fees, renting the real estate is helps them pay for the utility and maintenance costs.
 
FresnoR said:
As an airport manager for a city, we have similar language in our leases. Often it refers to the airport shutting down, losing funding, nation emergency and federal takeover. You lease probably also has language that you will have to return the land to clean and clear dirt upon the experation date at the lessors decision.

Depending on the governing agency (County), you will probably have a very difficult time changing that, as it will prob have to go to the board of supervisors, council and/or county attorneys office for approval or modification.

Realistically, you will prob be ok, because you have the power of PR and the media against elected officials. Politics do not like to look like they are picking off the little guy, and the news likes to report that.

Just food for thought
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Great to get opinions from someone on the inside, Rick. Thanks. The county has no history of trying to push people out of their leases, and it appears that the county would have to pass a law that would apply to all hangar owners, not just me, but I still feel like I'm gambling a bit. The likelihood of things going bad is very small, but the cost is pretty high. Kind of frustrating.
 
I don't like this language either.

It looks like boiler plate county protection language that you may be stuck with as every other hanger owner has on thier contract also.
 
NickAir said:
I don't like this language either.

It looks like boiler plate county protection language that you may be stuck with as every other hanger owner has on thier contract also.
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Thanks again for your help, Nick. Unfortunately, I might be one of the first few stuck with this language. The county just reworked its lease a couple years ago after many years using an older lease and there's not a lot of turnover here in Ellensburg. The older lease has no such language.

Though I could just assume the old lease, it only has 8 of its 25 years left. If I want the protection of a full 25-yr lease I'd have to accept the new terms. Kind of a catch-22.
 
alpinelakespilot2000 said:
Thanks again for your help, Nick. Unfortunately, I might be one of the first few stuck with this language. The county just reworked its lease a couple years ago after many years using an older lease and there's not a lot of turnover here in Ellensburg. The older lease has no such language.

Though I could just assume the old lease, it only has 8 of its 25 years left. If I want the protection of a full 25-yr lease I'd have to accept the new terms. Kind of a catch-22.
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But what happens at the end of the 8 years?
Do you loose the lease? ...or does it get renewed using the current (new) lease?

The old lease words might tell what happens at the end of 8 years....
 
Our airport is city owned and has similar issues of changing new language, like you are dealing with.
Hanger owners here have organized enough to cause now two major meeting on the new hanger lease language. The city wanted to cut our lease term down from 20 years or we could just keep the old lease. If a hanger was sold, the new owner had a choice of assuming the remainder of the old lease, (as is offered to you,) or sign a new lease with new and more restrictive language. I understand your concerns. Our new proposed lease is modern and has some similar language that you identified. As mention on my prior post, it sounds like modern boilerplate protective language for the lease. It is a trend of modern legal protective language. This trend is nation wide we were told. I don't like it at all either. The city attorney has revised his first draft of lease language due to our challenges. You may wish to organize hanger owners to do the same.

Until it is resolved with better language you may wish to just assume the old lease, therefore avoiding the new language. It will also save you about $500 by assuming the old lease. Just a name change. This gives you 8 years of language you will feel better about. You likely don't need to worry about not getting your lease renewed upon the 8th year. There should be an official airport master plan of growth and future planning that you can review. Unless they are planning to shut down the entire airport, they do want your revenue, (lease payment and taxes on the building.) Your airport is not the only one dealing with new lease language.

Keep me posted on the progress since we are dealing with the same problems.
 
az_gila said:
But what happens at the end of the 8 years?
Do you loose the lease? ...or does it get renewed using the current (new) lease?

The old lease words might tell what happens at the end of 8 years....
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There is nothing in the lease that indicates anything will automatically happen. In the past, renewals have been the standard practice, but I don't think the county would ever guarantee that renewal would be offered 25 years in advance.
 
Affects value

A contract is a means of allocating risk. The lessee in this case accepts all of the risk, and the language indicates vastly overzealous lawyering (that's a whole nother topic). As a practical matter, you probably have nothing to worry about for the next 8 years, but the acceptance of the risk means that the value of what you are getting is lower than it otherwise would be. The chances of the municipality changing the terms of the lease is so remote that it would likely be a waste of time to ask, and the chances of a renewal of the lease at the end of the term are incapable of being determined at this time. I suggest negotiating a price based upon the remaining lease term only, without considering renewal, and keeping in mind the substantial risk you take. If you take the reasonable market value of the hangar -- lets say $250/month -- that's about $24k for the remainder of the lease. Discount that amount for the risk -- say 50% -- and you have a value, perhaps, of $10k to $15k. Change these figures to adjust to what you think may happen. This way, you are unlikely to get hurt badly if the worst happens, and if things go smoothly you may get a bargain down the road. Just remember, you are assuming the risk. My guess is that the seller would consider an offer like this a slap in the face, but if you pay a lot more, you could get badly hurt, depending on how risk-averse you are.
 
If there is some change in the law where they can't control the airport, then your property has taken a big hit no matter whether that provision is in the lease or not. What would be nice is if they agreed to compensate you in the event of early termination. If there is not a provision somewhere else in the lease about buying you out in the event of early termination, this would be a good place to put it. If I were advising the city, I would tell them not to agree to that.

In any event, this only comes into play if there is some change where they cannot lease, use, control, protect, or maintain the Property. Not exactly sure what that situation would be short of closing the airport.

Anyway, I am not a land use lawyer, you may want to consult a local lawyer that does more land use law.

Bruce Green
Eagle N110GM
 
Mike offers good advice....you do have a risk. The problem is that the past performance of local officials doesn't guarantee anything about the future, simply because sooner or later you get new officials.

My airport is currently 3 years into a hostile administration. Private hangar owners were recently handed new land leases with one year terms; the prior norm was 10 with two 5-year options. Not surprisingly, none were willing to sign a one year, no option lease for the dirt under their $200K and $300K hangars. So, those with expired terms have been served with eviction notices. Attorneys have been hired.

The two previous administrations were great. The next election is this fall. Things are going to get interesting around here.

FWIW, FAA airport grant assurances require that land leases be reasonable. Unfortunately they do not define reasonable.
 
mikegraycmg said:
I suggest negotiating a price based upon the remaining lease term only, without considering renewal, and keeping in mind the substantial risk you take. If you take the reasonable market value of the hangar -- lets say $250/month -- that's about $24k for the remainder of the lease. Discount that amount for the risk -- say 50% -- and you have a value, perhaps, of $10k to $15k.
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Thanks for the input, Mike. Especially good to have it from a lawyer. I followed you right up to the $24K for the remainder of the lease, but then you lost me with the discounting it 50% further. That onerous clause that started this thread only applies to the new 25 year lease. The old lease with 8 years remaining does not appear to carry any more risk than normal. Sure, I can't count on a renewal with favorable terms, but why discount the $24K to 10-15K? That aside, as a lawyer, you'd recommend rejecting the 25-yr lease entirely?

Part of the reason this is complicated is b/c, given the lack of other airports anywhere close, and given the lack of any other reasonable hangar options at this airport (there really are none), rejecting this lease from the county effectively means the end of aviation for me as a hobby. Plus, the current owner is already discounting the hangar price b/c he wants it to stay in the EAA family and further the chapter's future. He wants $32K and quotes I had worked up show a new hangar, same size, would run $49-50K+. I'm not sure that negotiating downward is likely. And, if I don't move on it, there are a number of others wanting a hangar that most certainly will take it, bad lease and all. (And, yes, I know that making decisions under pressure does not always lead to a good outcome!)

I know that every individual's situation and legal resources are different, and that advice is really hard to give from a distance, but still I appreciate everyone's input. Really I think I need to get as many of the current hangar owners (about 10 of us total) and try to convince the county that their terms are unreasonable. As others earlier in this thread have noted, however, that doesn't appear terribly likely.
 
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A current hangar project that I am currently involved in has a clause stating that if the lease is pulled from us, the city will buy the hangar from the owner at 70% of its value (I'm assuming that it would be the initial value minus depreciation, then take 70% of that).

However I don't have the lease in front of me with exact wording, so I cannot quote with full accuracy.
 
I misunderstood your situation. It looks like the City wants you to sign a 25 year lease when you buy the hangar, if I get this right. If so, you don't have 8 years to think about it while you use the hangar undisturbed. If this is the difference between flying or not flying, then it's no longer a value question. It's a want-to question -- one only you can answer. If you buy it, fight hard to keep out or to modify the clause and get a local lawyer to help you. In the end, though, it sounds like for you it's just the cost of flying.
 
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mikegraycmg said:
I misunderstood your situation. It looks like the City wants you to sign a 25 year lease when you buy the hangar, if I get this right. If so, you don't have 8 years to think about it while you use the hangar undisturbed.
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Indeed I can just assume the existing lease, which gives me 8 years under the old lease agreement with fairly good protection from the county. Thereafter, they may or may not allow me to renew/resign for another 25 years, but if they did it would be under the new agreement. However, if I want 25 years guaranteed starting from today, I have to sign the new version of the lease right from the start.

Thus, the question really becomes, do I choose:

Option A--8 years of a good lease guaranteed (with the strong likelihood that it would be renewed for an additional 25 under the new lease terms once these 8 remaining years expire). The added advantage of this is that the land lease rates for those first 8 years are half what they would be under the newer version of the lease. Would save me about $500/yr for the first 8 years. But, again, there's no guarantee the county would allow me to renew, meaning it could be 8 years and done. Unlikely, but possible.

Option B--Jump right into a new 25 year lease with the new terms. On the one hand, I'm guaranteed 25 years rather than only 8. On the other, that's only true so long as the county never invoked that clause I started this thread with.

Option C--Walk away entirely, meaning I may have to abandon my hobby. Prudent legally but, as you note, Mike, not necessarily personally.

Thanks again to all for the input. Even if I must make my own decision, it helps me to better understand what some of the potential options and ramifcations are.
 
A

Me, I'd go with option A. You'd have some actual value for awhile, and you could politic with the City while you negotiated a new lease. I can't emphasize enough, however, that you need to hire a lawyer to negotiate the renewal. Find someone who locals think highly of, and who my be well connected with city government. Avoid PI lawyers.
 
How about option "D"--move to an airpark.

Seriously though, in your shoes I'd opt for option A also. You may not be flying in 8 years, lost medical, gave up because of ADSB (same year), sold plane or moved.
 
With option A, if it's a steel hangar, then it's value is not zero if you loose the lease. It has a used value.

I know of several steel hangars that have been sold, disassembled and moved to other locations.
 
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