July-August 2022 - 31

LEGAL MATTERS
equity, adds that the prospective hangar " may actually
be on an apportioned portion of larger leasehold, such
as a ground sublease. " In such cases, the ground lease,
ground sublease and any HOA-style rules or shared expense
matters should be considered, adds Wilson. As a threshold
matter, any prospective purchaser should verify that the
leasehold interest is assignable. Gist adds that " the value
of the hangar is largely dependent on the term remaining
on the ground lease. " Thus, the longer the lease term
remaining - and assuming a high demand airport - the
higher the value of the hangar.
Understand the Process for
Acquiring the Interest
Assuming that the prospective purchaser understands what
they are buying and has verified that the long-term lease is
assignable, they must next consider what the process for the
assignment of the lease is. Most airport leases will require
approval of Airport Sponsor before they can be assigned.
The process for approving assignments of airport leases
varies significantly from airport to airport. Gist notes that
the more in demand the airport is the more complicated
and lengthier the process for approving lease assignments is.
Most commonly, the Airport Sponsor is a municipality
or quasi-government authority. As a result, the approval
of an assignment may require it to be acted upon at a
public meeting of a city council or airport commission
and may require an opportunity for community/public
comment before action. If this is the case, it is important
to understand the frequency that the city council/airport
commission meets, amount of notice required for agendas,
and the process for getting a matter on the agenda. In
addition, the prospective buyer should inquire as to what
will be required before the assignment can be presented
for approval. In most cases, the city council or airport
commission will require a fully executed purchase and
sale agreement before it will consider the approval of
the assignment. At some airports, the airport manager/
director has the authority to consent to the assignment
of an airport lease. Nonetheless, it is still important to
note what the airport manager/director will need to
review in order to consent to the assignment and what
the timeline for such approvals is.
In short, you don't want to be bound to a closing date
prior to when you reasonably anticipate the Airport Sponsor
to approve the assignment of the lease.
Consider What Due
Diligence Is Needed
The level of due diligence that a prospective purchaser
will seek is generally related to the purchase price and
the length of the lease and whether the purchase is being
financed. Generally, the greater the investment the more
due diligence a prospective purchaser will seek. In setting
terms for the letter of intent and/or purchase and sale
agreement, prospective buyers should not only consider
what due diligence they may want but also what their
lender may require.
Due diligence may include the following: (1) review
of the underlying ground lease and related documents; (2)
inspection of the premises by a structural engineer; and (3)
environmental inspections. A prospective purchaser may
want to have a structural engineer evaluate the premises
and confirm that they are structurally sound. Additionally,
if the prospective purchaser is going to be assuming liability
for the condition of the premises, they may want to have
a Phase I environmental inspection conducted. It comes
as no surprise that PFAS and fuel contamination are often
identified on airports. It is common for letters of intent
to include 30 days for due diligence. It is good practice to
include provisions that allow for the due diligence period
to be extended for good cause.
Consider Whether You Are
Able To Use the Hangar for the
Purpose You Are Seeking
Many first-time hangar purchasers may not appreciate the
fact that there may be limitations on what the hangar can
be used for. A prospective purchaser should expect that
their use of the hangar will be limited to aviation purposes.
There may be other limitations and those limitations may
be scattered throughout the lease, the Airport's Minimum
Standards, any Airport Rules and Regulations as well as
the Airport's Master Plan, and Airport Layout Plan. This
is particularly important if the prospective user intends to
use the hangar for a commercial purpose.
Consider Whether You Are Able
To Make Needed Improvements
A prospective buyer should evaluate what, if any, improvements
it intends to make to the premises. Additional
improvements and/or expansion of the hangar will likely
require approval of the Airport Sponsor. Therefore, it is
important to understand what the approval process requires
and the timeline for that process. A prospective buyer may
also want to consider whether the Airport Sponsor's history
of approving tenant improvement plans is. Are they generally
approved or does the Airport Sponsor weigh in on
the plans. Gist cautions prospective buyers to " Be thinking
about more than what you need now. Leave room for
growth. Plan for growth. Hangars are not easy to come by. "
Paying attention to the points raised herein, which often
surprise prospective hangar buyers, are important to effectuating
a smooth transaction. Additionally, prospective buyers
should not underestimate the importance of working with
qualified professionals. Their experience and knowledge in
this area will save you delay and expense that is avoidable
by working with experienced professionals. In closing, I
thank Katrin Gist and Doug Wilson for their collaboration
in this article. 
JULY/AUGUST 2022 \ AVIATIONPROS.COM / 31
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July-August 2022

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