Your FBO’s Airport Lease: Payments, Maintenance and Termination

By John Enticknap and Ron Jackson, Aviation Business Strategies Group ABSGgroup.com

Multi-Part Series: The 7 Immutable Elements for Building Equity in Your FBO Enterprise ©
Third Installment on Airport Leases

For this blog post, we’ll continue our series called the 7 Immutable Elements of Building Equity in Your FBO Enterprise© as we dive deeper into the topic: Obtaining a long-term airport lease.

In our last post, we covered: Term and Option Years, Operating Rights and Assignment Sale Clause. Now we are ready to discuss the next three lease elements: Payments, Maintenance Responsibilities and Termination.

Payments, including rental, gross revenue, flowage fees and out years to include escalators.

For this section of the lease, it’s important to check the exact wording so that 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.

Pay particular attention to the specific language for this section of the lease. Your FBO can end up on the short end if there is any ambiguity which can lead to unwanted finger pointing. If you are leasing buildings owned by the airport, most leases provide for the lessee (FBO) to pay for building upkeep, utilities and taxes. Spell out who’s responsible for various types of ramp and common area maintenance. For instance, if you operate in the snow belt, who is responsible for snow plowing ramps, approach taxiways or other areas?

A Note About Taxes

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 these responsibilities.

Termination by the FBO or lessor.

In case of dispute, natural disaster, fire or other unforeseen events, it is important to spell out explicitly how the lease can be terminated by either party. 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.

In our next blog, we will breakdown the final three components of an airport lease to include:

Improvements, new buildings and renovations.
Insurance, indemnity and hold harmless.
Environmental liability.

Please leave any comments you have about this blog post below. If you have any questions, please give us a call or send us an email: jenticknap@bellsouth.net, 404-867-5518; ronjacksongroup@gmail.com, 972-979-6566.

ABOUT THE BLOGGERS: John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and is an IS-BAH Accredited auditor. Ron Jackson is co-founder of Aviation Business Strategies Group (ABSG) 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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