The previous article of The Frugal Pilot covered the advantages and disadvantages of aircraft co-ownership toward helping you decide whether fractional ownership is right for you. This article will assume that you've decided to share your wings and cover the things you will want in your written co-ownership agreement.
Get It in Writing
A co-ownership agreement is a simple document between two to four people who want to share an aircraft. It doesn't need all the whereases and heretofores required by a partnership or flying club. In fact, it doesn't even have to be in writing. However, getting the agreement in writing will help minimize communication problems that typically crop up. As the relationship continues, it's a good idea to periodically review the original agreement terms – and that's easier if they are in writing.
Disclaimer: I am not a lawyer. However, I have written many simple legal agreements that have stood the test of time and legal battles. My legal philosophy is never to write a contract with someone you don't trust. Following is a sample co-ownership agreement.
A Simple Agreement
This agreement between Joe Smith and John Doe (co-owners), dated September 15, 2014, is for the purpose of acquiring a 1970 Wingaling (N12345) and holding the title thereto as Tenants in Common. The purchase price shall be $20,000, of which one-half (1/2) or $10,000, shall be paid in cash equally by the co-owners.
Base: The aircraft shall be based at the Rutabaga Airport and the costs of hangar or tie-down there shall be borne equally by the co-owners. Costs of storage or landing fees while the aircraft is operated away from the base airport shall be borne by the co-owner so operating.
Fixed Costs: Fixed expenses include hangar or tie-down rental fees, insurance, estimated cost of the annual inspection, group financing, and property taxes. A Fixed Expense account shall be maintained and contributed to equally by the partners. The contribution rate shall be $100.00 per co-owner per month, adjusted periodically as required to cover anticipated expenses.
Operating Costs: Operating expenses include fuel, oil, engine and airframe maintenance, avionics maintenance, and related maintenance. All operating expenses shall be paid out of this fund and shared based on the hours the aircraft was flown by each co-owner. [Alternately: The contribution rate shall be $100.00 per co-owner per month, adjusted periodically as required to cover anticipated expenses.]
Insurance: Adequate insurance shall be carried by the co-owners to insure against the reasonably anticipated risk of the operations intended. The person operating the aircraft when subject to an insurance claim shall pay the policy deductible.
Authorized Pilots: No other person other than the co-owners shall be authorized to operate the aircraft except with the express consent of all co-owners, and then only if that person has the experience level required by the aircraft's insurance policy.
Usage: No commercial or for-hire operations, as defined by current FAA regulations, may be performed in the aircraft. No flight instruction activities, except as required by the co-owners to maintain or upgrade their current certification, may be performed in the aircraft.
Flight Scheduling: The aircraft shall be available on a first-come, first-served basis as recorded on the Flight Scheduling Sheet in the aircraft.
Flight Log: All flights shall be recorded immediately after each flight on the Flight Log in the aircraft. The Flight Log shall include entries for identified maintenance or repair issues.
Responsibilities: It is agreed that Joe Smith will manage the financial records and John Doe will manage the maintenance records for this co-ownership, each keeping the other informed on status at any time requested.
Expanding the Agreement
Depending on what level of formality the co-owners want, a simple agreement can be expanded to include additional conditions and guidelines. For example, if you agree that the engine, propeller, or airframe will soon need some major work in the near future, you can establish a reserve account that anticipates the cost. Or you can simply wait until it's needed and work out equal sharing of costs.
Scheduling flying time in your shared wings may be more complex than a sheet in the cockpit. You can use one of the online flight scheduling programs available, such as AircraftClubs.com, FlightSchedulePro.com, PilotSchedule.com, or SkyManager.com.
If there is a concern about ownership in the case of the death of one of the co-owners, put something in your agreement that solves the problem. Same for concerns about liability. If one or both the partners are concerned that a partner could be incur liability beyond what the agreement covers, then add a clause that clarifies how liability will be handled. One more resource for those thinking of co-ownership: The AOPA offers an online Pilot's Guide to Co-Ownership covering the relevant topics to help you find a long-term way to share your wings.