Breaking Down the 10 Critical Elements of an FBO Airport Lease, Part 2
/By John L. Enticknap and Ron R. Jackson, Principals, Aviation Business Strategies Group
Previously we discussed three of the 10 critical elements of an FBO airport lease as part of our series on the six intangibles that can build equity in your FBO.
For this blog post, we'll break down three more of the airport lease elements and provide insight and tips to help you protect your business while adding intrinsic value to your enterprise.
Payments, Including Rental, Gross Revenue, Flowage Fees and out Years to Include Escalators
By paying attention to the exact wording of this very important element, you can protect yourself from any future disagreements or disputes. Payments may include investments in refurbishment of your terminal building and/or hangars to keep them up to date. Payments may include capital investments for a new hangar or building to exercise lease extensions. These rent payments and additional investments are all financial obligations that contribute to the success or potential failure of your FBO. Please note that each one of these elements is negotiable; therefore, do your homework by getting other comparable FBO leases in your area and region. If you have a competitor at your airport, ask to see its lease. Because it is considered a public record, you can obtain a copy under the Freedom of Information Act (FOIA). Remember, knowledge is the key to negotiating your best rates.
Building/Ramp Maintenance Responsibilities
Be sure to be very specific with the language for this element. Any ambiguity can lead to finger pointing, and the FBO can end up on the short end. If you are leasing buildings owned by the airport, most leases provide for the lessee (FBO) to pay for building upkeep, utilities and taxes. If you operate in the snow belt, it is incumbent on the FBO to understand whose responsibility it is for snow plowing ramps, approach taxiways or other areas.
Be very clear on taxes. In many cases you don’t have to pay property taxes on buildings owned by a city or municipality. In some states you may have to pay school taxes or other fees. Therefore, be clear on defining responsibilities.
Termination by the FBO or Lessor
In this section, it is wise to spell out unequivocally how the lease can be terminated by either party in cases of dispute, natural disaster, fires or other unforeseen events. What is most important is that the parties to the agreement have sufficient time to correct and negotiate any disputes or other occurrences. The “cure” clause should be at least 30 to 60 days to fix problems. This length of time is generally not used if the issues are late payment of rents or fees.
When there are issues, prompt resolution is the best way to solve problems. As Colin Powell once said “Bad news isn’t like wine. It never gets better with age.”
In our next blog, we’ll examine the final three critical elements of your lease with additional tips that can help you build equity in your FBO.
About the bloggers:
John Enticknap has more than 35 years of aviation fueling and FBO services industry experience. Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.
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