In the earlier articles of this series, we discussed some of the more common grant assurances that are disputed as between airport sponsors and tenants; preserving your own documents and evidence, as well as seeking out evidence from your adversaries; and the legal remedies available to an airport tenant under the Code of Federal Regulations. Our next articles focus on some of the more practical and everyday considerations for FBO Operators with respect to increasing leverage when relations with subtenants become difficult. This article focuses on providing the Fixed Based Operator with key terms and provisions to include in Subleases.
Landlord tenant laws and attendant lien rights vary from state to state, making them less than predictable, especially in the absence of a written contract. To this end, and to confer some predictability in the event that such a relationship sours, it is imperative that FBO Operators have written agreements with all subtenants, ranging from general aviation tie-down customers to corporate flight department subtenants who lease an entire hangar. These written contracts should address, at a minimum, the issues discussed herein to ensure proper allocation of risk.
1. Make sure that your sublease identifies the correct party
This may seem an obvious point, but we see this issue in practice time and time again. Ensuring that you have the correct entity will increase the chance that your subleases are enforceable and may allow you to lien your subtenant's aircraft if you are in a jurisdiction where same is permitted. A lien against an aircraft is frequently an FBO Operator's primary means of recovery for outstanding hangar rent, tie-down fees, and/or maintenance costs.
First, you want to confirm that the entity with which you are contracting was validly formed, is in good standing, and is authorized to do business in the state in which you are located. This can be checked by running the entity's name through the database that is (generally) available on your state's Secretary of State website.
After you have confirmed that the entity is validly formed and authorized to do business, you want to confirm that it is the entity that actually owns the aircraft (if there is one at issue). Many aircraft owners, particularly corporate owners, have complex ownership structures. It is not uncommon for one entity to own an aircraft and dry lease said aircraft to a second entity for purposes of operation. If you're an FBO Operator, however, the ability to enforce a lien against an aircraft is directly tied to whether your subtenant has the authority to encumber the aircraft.
To this end, always check the available aircraft registry databases to confirm who or what entity is the actual registered owner of the aircraft. By way of example, with respect to U.S. registered aircraft, your first step should always be to check the FAA Aircraft Registry (http://registry.faa.gov/aircraftinquiry/). If the aircraft owner identified thereon is not identical to your prospective or actual tenant, you have a potential gap in authority to encumber an aircraft and may not be able to assert a valid lien. If you identify any such gap, request any missing documents (a dry lease for the aircraft will be most common) to close the chain and be sure that the dry lease or other comparable document (1) explicitly allows your subtenant to enter into a lease and, most importantly, (2) explicitly allows your subtenant to encumber the aircraft.
2. STATE YOUR FEES AND COLLECTION PROCESSES ACCURATELY
In many states, absent a contract with respect to same, FBO Operators are limited in regard to what they can claim for fees and costs due and owing in the event of a lien upon an aircraft. To this end, a hangar and/or tie-down agreement should include a very clear statement of monthly (or other applicable periodic) fees for same and, equally important, FBO Operators must abide by their own stated billing practices. If your agreement indicates that you bill on a monthly basis, you must bill on a monthly basis. Failure to do so can result in a waiver of otherwise collectable fees.
These collection practices should also outline events of default, termination rights, and lien rights with respect to subtenant aircraft.
Further, and because many states are possessory lien states (i.e., the FBO Operator must retain physical possession of an aircraft in order to enforce a lien), these agreements should also specifically provide for continued accrual of monthly (or other) fees in the event of any such lien proceeding to ensure recovery by the FBO Operator for the entire duration of an aircraft's presence upon an FBO Operator's premises.
3. Insurance requirements should be clearly stated
Most FBO Operators are, themselves, tenants of Airport Operators/Owners and are subject to independent contractual obligations. Frequently included in such leasehold contracts is a requirement that FBO Operators obtain proof of insurance from their own subtenants. Even if not explicitly required by any such lease, doing same is good practice because it ensures sources of recovery between subtenants for losses other than an FBO Operator's own hangar keeper's and/or commercial general liability policies.
In doing so, make sure that the insurance requirements included in your sublease meet or exceed the insurance requirements set forth in the minimum standards and/or required by your lease with the Airport Operator/Owner to ensure compliance with your own lease requirements. In conjunction with clearly identifying insurance requirements, indemnity and hold harmless provisions should also be included.
4. Clearly identify any governing rules and regulations
As a practical matter, the Airport Operator, rather than the FBO Operator, promulgates the rules and regulations governing airport matters. To this end, it is good practice to incorporate same by reference into any hangar and/or tie-down contracts and, if possible, to either post same in a public place or provide same directly to subtenants. Likewise, and to avoid any unnecessary losses, provide and enforce procedures (whether established by the Airport Operator or the FBO Operator) pertaining to securing aircraft in anticipation of natural disasters (e.g., hurricanes, tornadoes, etc.). These provisions should also clearly identify the FBO Operator's versus the subtenant's maintenance obligations, including issues of disposal of hazardous materials.
While our next article will focus on enforcing these contracts, paying particular attention to these issues in drafting and executing subtenant agreements will aid FBO Operators in creating enforceable documents that will assist FBO Operators in perfecting liens against subtenant aircraft if and when necessary.
