The unclub unpartnership?

mikea

mikea

Touchdown! Greaser!
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Kent and I were talking and he suggested something that never occurred to me: I can share use of the plane without sharing ownership.

What if I let one or more other pilots fly my plane and pay me for the time flown, even a flat monthly for access?

I always thought there were all kinds of FAR rules that prevent that, but I'm thinking I only need a commercial setup if the plane was for used for hire.

I guess the only limitation is insurance so any other pilot have to be named on the insurance policy. I'd ask for the flat rate to cover the additional cost of insurance.

What I'm after is a way to fly the plane more often and share expenses without getting into a bad marriage. It would be a trial marriage for a potential new partner.

What d'ya think?

Now tell me all the ways it can't be done (Ron.)
 
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That's what my deal is.......non-equity partnership. I'm a named pilot on the insurance and I pay a monthly fee. It really boils down to a club of sorts, PM me for more info.
 
I did that with my C-172, most insurance policies will allow up to three named pilots before jacking your rates or making you go to a commercial policy. I had my instructor and one of his students on mine and it worked out great for all.
 
It can be done lots of ways

The other pilot rents from you at an hourly rate dry. They maintain their own non owned policy. Thats what I do with a friend.

-If they meet your policy's "open pilot" requirements then your protected by both your and their policy at least for property damgage and hull damage.

- You could put them on your policy as either a named pilot ( you are covered for them but they need their own policy OR put them on as a named insured. This may bump the premium up a bit and you should check with your carrier as to how much. Frankly it may be more advantageous to the renter pilot just to get thier own non owned policy as then they are not limited to flying just your plane. My arrangement works fantastic as The owner and I get along very well.
 
mikea said:
Kent and I were talking and he suggested something that never occurred to me: I can share use of the plane without sharing ownership.

What if I let one or more other pilots fly my plane and pay me for the time flown, even a flat monthly for access?

I always thought there were all kinds of FAR rules that prevent that, but I'm thinking I only need a commercial policy if the plane was for used hire.

I guess the only limitation is insurance so any other pilot have to be named on the insurance policy. I'd ask for the flat rate to cover the additional cost of insurance.

What I'm after is a way to fly the plane more often and share expenses without getting into a bad marriage. It would be a trial marriage for a potential new partner.

What d'ya think?

Now tell me all the ways it can't be done (Ron.)
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First thing you should do if the plane is in your name is to put it in a LLC. That way your assets are protected from liability incurred by one of your unmembers. Then you need to figure out what you'd need to charge to make this work to your benefit. If you make the hourly charge too low and/or don't collect something for your fixed costs the increased usage (and inevitable maintenence issues) could actually increase your own cost to fly.
 
Mike thats what i do. I have Tim named on my Ins. and he pay for his expenses and the tiedown for the use of it. if you need more info how it working call me 717-554-8247
Dave G
 
I think the advice is good regarding non-equity partnerships.

gismo said:
Then you need to figure out what you'd need to charge to make this work to your benefit. If you make the hourly charge too low and/or don't collect something for your fixed costs the increased usage (and inevitable maintenence issues) could actually increase your own cost to fly.
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Figuring out the price to charge is what I'd like to comment on. Personally I think an hourly rate is best.

IMHO you need to figure out the incremental cost to fly the plane another hour this includes fuel, oil, engine/prop overhaul prorated, 50/100 hrs inspections, wear & tear type maintenance. I know the FAA 100hr is not required and we don't do that but we have a more detailed list of inspections done every 100hr.

That is what it costs you to let someone take the plane for a ride plus any increase in insurance to put a less experienced pilot on your policy and things like a gate pass at the airport. Anything more than this reduces your cost of ownership, but is a far cry from what you pay per hour to fly your own plane.

Joe
 
I once used what we called a "virtual" partnership. After a move that took me away from my partnership, I was put in contact with a friend-of-a-friend who had just lost his medical. He wasn't ready to sell the plane yet since he thought he'd get it back in a year or two. It was just sitting. I don't know legalities because it was done on a handshake and, to be honest, he was talking all the risk. We used a spreadsheet to define hourly variable cost and I kicked in the cost of capital on half the agreed equity of the plane per month. He covered all fixed costs and maintenance costs. I had access to what was essentially my own plane. Funny thing is that I didn't sell my partnership stake for almost 1.5 years, so the deal didn't save me money, but my cost to fly didn't go up when I moved.
 
That's the exact arrangement I had in the Mooney. I paid a monthly fee plus an hourly fee (there was a wet rate and a dry rate, dry rate was for long trips like when I flew out to Tony's party). I was named on the insurance policy.

The one thing that he did was have 100-hour inspections just to cover someone saying the plane was being rented. Probably not a bad idea, especially since on that plane the landing gear motor needed to be inspected every 100 hours anyway.

Lance is absolutely right - if you're going to do it, put the plane in an LLC.
 
You have to discuss this with your insurer, since renting is usually considered a commercial activity requiring the much more expensive "Limited Commercial" rather than the usual "Pleasure/Business" coverage. Make sure the activity you plan is covered by your existing policy, and if not, that you get appropriate coverage and factor the extra cost into your rental price. Finally, make sure that there are no state or local business restrictions on what you plan -- you'll probably need to check with an attorney on that.
 
Insurance and local taxes are both huge traps that owners fall into with regularity. For example, airplanes used 100% for business are exempt from personal property tax in Kansas. So an airplane owner who decided to dry-lease his Citation to a friend assumed (incorrectly as it turned out) that such usage would fall within the parameters of the exemption. He ended up paying more in PP taxes than his profit from the lease.

In the event of an accident, insurance companies are pretty good at getting to the bottom of any arrangement in which an owner is compensated by another party for use of their airplane. You may have thought you had a friendly wink-and-nod deal with your buddy who was paying you to use your plane, but when it comes time to cover the damages you should figure he will be singing like a canary to cover his ars.




Ron Levy said:
You have to discuss this with your insurer, since renting is usually considered a commercial activity requiring the much more expensive "Limited Commercial" rather than the usual "Pleasure/Business" coverage. Make sure the activity you plan is covered by your existing policy, and if not, that you get appropriate coverage and factor the extra cost into your rental price. Finally, make sure that there are no state or local business restrictions on what you plan -- you'll probably need to check with an attorney on that.
Click to expand...
 
Ron Levy said:
You have to discuss this with your insurer, since renting is usually considered a commercial activity requiring the much more expensive "Limited Commercial" rather than the usual "Pleasure/Business" coverage. Make sure the activity you plan is covered by your existing policy, and if not, that you get appropriate coverage and factor the extra cost into your rental price. Finally, make sure that there are no state or local business restrictions on what you plan -- you'll probably need to check with an attorney on that.
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Good idea. There are usually legitimate ways to deal with these issues, but sound advice from a knowledgeable professional, abd a comparison of various insurance policies, are a pretty good place to start.
 
flyingcheesehead said:
Even rented airplanes do not require 100-hour inspections... :no:
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they do if they're used for hired instruction.

That was one of the obstacles I had in mind - being that I owned my plane as a student. (I know. It was OK.)
 
Areeda said:
I think the advice is good regarding non-equity partnerships.



Figuring out the price to charge is what I'd like to comment on. Personally I think an hourly rate is best.

IMHO you need to figure out the incremental cost to fly the plane another hour this includes fuel, oil, engine/prop overhaul prorated, 50/100 hrs inspections, wear & tear type maintenance. I know the FAA 100hr is not required and we don't do that but we have a more detailed list of inspections done every 100hr.

That is what it costs you to let someone take the plane for a ride plus any increase in insurance to put a less experienced pilot on your policy and things like a gate pass at the airport. Anything more than this reduces your cost of ownership, but is a far cry from what you pay per hour to fly your own plane.

Joe
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I'm all for separating the hourly costs from the annual/fixed ones and charging separately. I only meant that unless the members are fully vested in the aircraft and hangars you'd need to collect for that as well as for the flying. Ideally the fixed costs would be covered by some sort of monthly dues or the like.
 
Ron Levy said:
You have to discuss this with your insurer, since renting is usually considered a commercial activity requiring the much more expensive "Limited Commercial" rather than the usual "Pleasure/Business" coverage. Make sure the activity you plan is covered by your existing policy, and if not, that you get appropriate coverage and factor the extra cost into your rental price. Finally, make sure that there are no state or local business restrictions on what you plan -- you'll probably need to check with an attorney on that.
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Policies and underwriters vary but my policy specifically allows me to charge something like up to three times my direct cost (engine/oil/fuel) when renting my plane to another pilot. I'm not sure if the other pilot has to be named on the policy as a pilot or insured but the only person I've ever "rented" to is a named insured (my neighbor).
 
mikea said:
flyingcheesehead said:
Even rented airplanes do not require 100-hour inspections... :no:
Click to expand...
they do if they're used for hired instruction.

That was one of the obstacles I had in mind - being that I owned my plane as a student. (I know. It was OK.)
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Only if the plane and instructor are hired from the same company. Unless you're planning on hiring flight instructors and paying them, and collecting money from your potential partners, the 100-hour rule totally would not apply in this case. :no:
 
flyingcheesehead said:
Only if the plane and instructor are hired from the same company. Unless you're planning on hiring flight instructors and paying them, and collecting money from your potential partners, the 100-hour rule totally would not apply in this case. :no:
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I'm pretty sure that what triggers the 100 Hr requirement is having the aircraft provided by the same person/organization as the CFI. Clubs get around this by claiming (legally) that the members provide the airplane so it's the same as hiring an instructor to teach you to fly your own airplane in the FAA's eyes. Seems like someone could dispute that if the members had no equity in the aircraft but AFaIK that (equity or lack thereof) doesn't factor in.
 
gismo said:
I'm pretty sure that what triggers the 100 Hr requirement is having the aircraft provided by the same person/organization as the CFI. Clubs get around this by claiming (legally) that the members provide the airplane so it's the same as hiring an instructor to teach you to fly your own airplane in the FAA's eyes. Seems like someone could dispute that if the members had no equity in the aircraft but AFaIK that (equity or lack thereof) doesn't factor in.
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That's how our club/FBO get's around it in the FAA's eyes, but the insurance company has apparently said that they still want the 100 hour inspections.
 
gismo said:
I'm pretty sure that what triggers the 100 Hr requirement is having the aircraft provided by the same person/organization as the CFI.
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Bingo. Write one check, plane needs 100-hours. Write two checks, it doesn't.

Clubs get around this by claiming (legally) that the members provide the airplane so it's the same as hiring an instructor to teach you to fly your own airplane in the FAA's eyes. Seems like someone could dispute that if the members had no equity in the aircraft but AFaIK that (equity or lack thereof) doesn't factor in.
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Our club is an equity club. We have a couple of CFI's in the club, but mostly members just use whatever instructor they want, often from the local FBO. 100-hours aren't required, but we do a "modified" 100-hour just to be extra-prudent (with regards to maintenance, not regulations).

Regardless, in the situation described in this thread, the 100-hour requirement does not apply.
 
gismo said:
I'm all for separating the hourly costs from the annual/fixed ones and charging separately. I only meant that unless the members are fully vested in the aircraft and hangars you'd need to collect for that as well as for the flying. Ideally the fixed costs would be covered by some sort of monthly dues or the like.
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I think we're on the same page. What I am trying to describe is the minimum charge that doesn't leave the owner subsidizing the renter.

I completely agree that a renter should help with the other expenses.

I guess the way I see it is that it takes a big bag of money to keep a plane parked in a hangar in airworthy condition, and the owner will be paying that whether he rents it or not. It would be nice if the renter were to pay a full share of the cost of owning based on hours flown, but I think the owner can see a benefit somewhere in between.

Joe
 
Areeda said:
I guess the way I see it is that it takes a big bag of money to keep a plane parked in a hangar in airworthy condition, and the owner will be paying that whether he rents it or not. It would be nice if the renter were to pay a full share of the cost of owning based on hours flown, but I think the owner can see a benefit somewhere in between.
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I agree, though if the owner isn't flying at all (medical issue, etc.), I don't think the renter should bear the full 100% cost of ownership simply because he's flying all the hours on the airplane. Like you say above, there is a benefit (the plane is being flown regularly) to the owner, so a cost less than proportionate to the hours flown could likewise be justified.
 
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