Airport Business - 32

LEGAL MATTERS
AUTHOR Alison Squiccimarro

Leasing Pitfalls in
and Around Airports
WHETHER YOU are leasing several acres to start up
as a Fixed-Based Operator (FBO), a Maintenance
Repair and Overhaul shop (MRO), or a single aircraft
hangar for commercial use, you should be mindful
that leasing property on an airport is different than
leasing other commercial property.
Therefore, potential airport
tenants should be mindful of some
of the most common pitfalls that are
often overlooked when entering into
a lease. Those looking to acquire an
interest in an airport-based business
should also be weary of the potential
pitfalls. If a tenant is aware of potential
pitfalls when entering into a lease, they
are better able to avoid or correct them
early on. By avoiding or correcting
problems, potential tenants minimize
risk of a breach, default and/or
protracted litigation. In this article,
I will discuss some of the potential
pitfalls tenants may face when entering
into an airport lease.
ALL TENANTS MUST COMPLY
WITH ALL AIRPORT MINIMUM
STANDARDS
In addition to complying with their
respective leases, tenants on airports are
required to comply with the Minimum

ABOUT THE AUTHOR

ALISON SQUICCIMARRO
Alison L. Squiccimarro is an attorney with
the Law Offices of Paul A. Lange, LLC with
offices in New York and Connecticut.
Alison's nationwide practice focuses on
aviation related commercial litigation
with an emphasis on FAA and DOT
Regulatory Issues, Airports, Insurance
Coverage and Employment matters.

Standards. The Federal Aviation
Association (FAA) encourages federally
obligated airports to establish Minimum
Standards for commercial service
providers and rules and regulations for
all other airport activities. Minimum
Standards for an airport are usually set
forth in a document referred to as either
the Airport Minimum Standards or the
Rules and Regulations for that particular
airport. Generally, airport leases include
provisions incorporating the Minimum
Standards by reference or indicate that
the lease is subordinate to the Minimum
Standards. If a lease contains a provision
that exempts a tenant from compliance
with the Minimum Standards, the
tenant should proceed cautiously. The
FAA encourages Minimum Standards
in order to level the playing field and
prevent discrimination. If a tenant is
given an exemption from the Minimum
Standards, it can create a situation
where another may argue that the
landlord/Airport Sponsor is engaged
in discrimination or has provided one
tenant with an impermissible Exclusive
Right. Such arguments can lead to a
complaint to the FAA and jeopardize
the public funding of the airport. As
the tenant who has and relies upon the
exemption, you can easily find yourself
in the middle of a costly dispute.
Before executing a lease with
an exemption allowing the tenant

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to deviate from certain Minimum
Standards, the tenant should ask the
landlord/Airport Sponsor whether other
tenants have similar exemptions and/or
whether the airport is working to update
the Minimum Standards to eliminate
the need for exemptions. If the only
option is to execute the lease including
the exemption, the tenant should be
mindful of same, gather all relevant facts
and carefully evaluate the risks before
proceeding. It is wise to consult with
trusted counsel in this scenario.
AVOID LEASE TERMS IN EXCESS
OF 50 YEARS
Federally obligated airports are required
to hold "good title" and must avoid
actions that would deprive the airport
of the rights and powers to control
development and comply with the
federal obligations. "Leases that exceed
50 years may be considered a disposal
of the property in that the term of the
lease will likely exceed the useful life of
the structures erected on the property."
(FAA Order 5190.6B at 12.3(b)(3)).
According to the FAA, "tenant ground
leases of 30-35 years are sufficient to
retire a tenant's initial financing and
provide a reasonable return for the
tenant's development of major facilities."
(FAA Order 5190.6B at 12.3.(b)(3)).
Thus, if you are entering into a lease
that exceeds 35 years you should be
mindful of the risk that the FAA may
object to the length of the lease and there
is further risk that the FAA may require
the airport to shorten the term. If the
airport wants to shorten the term, it will
require a renegotiation of your lease and
the tenant should attempt to leverage
your position for more favorable terms.
Airport Business

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