Elements of a Fractional Jet Agreement
When negotiating a fractional jet ownership agreement, it pays to do your homework. A fractional ownership contract includes four major agreements.
1) Binder: A binder document or deposit agreement is used to hold a buyer’s share of an awaited aircraft. The binder should specify the aircraft’s model and tail number, its total sale price, and its scheduled delivery date. The binder should also specify the situations under which the buyer’s deposit could be refunded.
2) Purchase agreement: A purchase agreement documents the sale of fractions of jet ownership. Purchase agreements for private jets should describe the airplane in detail (e.g., its engine models and the age of its airframe). Purchase agreements should also include clear statements of craft valuation and resale terms and prices. Buyers should be informed that since the value of their shared craft will fall, so too may the value of their shares.
3) Master dry lease exchange agreement: This document essentially states that fractional owners permit one another to use their jets. With dry leasing, the lessees involved in a shared fleet share their crews, fuel, and maintenance costs. A master dry lease exchange agreement governs how fractional owners will divide their rights and responsibilities to the aircraft.
4) Management agreement: A management agreement explains when a fractional jet owner can fly, for how many hours, and at what cost. It includes details such as what costs will be incurred by the lessee if fuel prices rise, and whether the lessee may use craft from another level of the fleet. If a salesperson has offered any concessions during negotiations, then these should be included in the management agreement too.
Reading jet charter legal agreements is hardly entertaining, but understanding the paperwork is the first step to negotiating a fair deal.