Co-ownership vs. Sole Ownership

by Paul Engstrom

Finally. After all those dreams about owning an airplane, you've decided to take the plunge.

Now comes another major decision, especially if this hefty financial commitment has you a bit on edge: co-ownership or sole ownership?

It's an issue that many prospective owners in general aviation struggle with. Both options entail promises and perils, which is why a thorough assessment of your needs and goals and, in the case of co-ownership, lots of up-front preparation is so important before moving ahead.

Though partnering may offer opportunities to fly with and learn from like-minded buddies, by far the chief advantage is cost-sharing, says Ron Wanttaja, author of Airplane Ownership. Not only does it provide a buffer when the Lycoming disintegrates and a new engine costs thousands of dollars, but it also enables you to own "more" airplane for less money - a high-performance Bonanza, for example, vs. a standard Warrior.

On the other hand, if you can absorb large expenses without raiding the kids' college fund, sole ownership may be the ticket.

"The point is, I like owning my own plane," Wanttaja says. "I like flying it, I like washing it, I like fixing it, and I like sitting on a flight line, leaning against its side, and watching the world go by. Expensive? I guess."

Indeed, pride of sole ownership and the relative peace of mind it affords are big plusses when you consider the flip side of responsible co-owners'those who fly like cave men, who are slow to pay their fair share, whose vocabulary doesn't include "maintenance," or who consistently schedule the plane when a partner wants to fly.

"One of the major drawbacks concerns any sort of quirks partners may have," says Wanttaja. "In a small, three-person flying club I was in, I could always tell when a certain partner had flown the airplane because of the way he'd put the chocks back in. There was nothing really wrong with the way he did it, but it wasn't the way I liked them to be. It really pointed out to me that this wasn't my airplane. It was the club's."

Squabbles over money and airplane scheduling are the most common culprits when partnerships turn sour, according to Brian Jacobson, a professional aircraft appraiser and buyer's agent. These problems often arise, he says, because co-owners gave little thought to the many details that require close scrutiny before a relationship begins.

Many of us have heard the tale about penny-pinching Joe. In a three-way partnership, he balks and otherwise makes life miserable for co-owners Bill and Frank when they propose a $15,000 upgrade to the aircraft.

Here, in summary, are other issues to keep in mind as you weigh your ownership options:

• Partnering allows pilots to "dip their toes into the ownership pond," as Wanttaja puts it, before they spring head-first into a solo commitment.
  
• It's fairly easy to calculate the fixed costs of ownership - hangar rental, insurance, and those related to annual inspections, maintenance, and repairs and divvy them up among the partners.
  
• As Jacobson notes, the more partners there are, the more difficult it is for everyone to get along.
  
• If you fly many hours each year and need scheduling flexibility, sole ownership may be the better financial and logistical choice.
  
• Co-ownership is akin to marriage. Finding just the right partner - someone whose personality, aviating style, and safety and maintenance philosophies are compatible can be difficult and time-consuming.
  
• A partnership's insurance coverage may be more expensive than that for a sole owner. Also, depending on the type of aircraft, insurers might insist that all co-owners be IFR rated.
  
• You could be named as a co-defendant if your partner crunches the plane and a lawsuit ensues.
  

There are so many variables in co-ownership, and so many unpredictable and predictable things that can go wrong, that entering one without a formal, detailed, written agreement would be foolhardy. Think of it as a prenuptial contract.

The devil, as they say, is in the details. For example, who will choose the aircraft mechanic? What happens if a partner proposes moving the plane to another airport? Can one co-owner veto a costly upgrade or will majority rule? What if a partner wants to sell his or her share? How will the partners decide which prospective buyer is acceptable?

Most of these thorny issues won't ever surface. But if one or more do, former bliss could quickly fade to purgatory.

"Partnerships can be the key to low-cost owning," Wanttaja says, "but do your homework first!"

Another book on this topic is Keeping the Peace in Partnerships, by Bruce Luedeman.