Leasing time in aircraft to a non-pilot

[Kritchlow]

First of all, non-pilots lease aircraft all the time. Usually they are companies, but it could conceivably happen with an individual. Getting into the weeds a bit, the FAA distinguishes between a "wet" and a "dry" lease. "Wet" doesn't mean "with fuel" like an FBO rental. It means "with pilot and flight crew." "Dry," on the other hand, involves a transfer of full operational control to the lessee. In the purest sense, the lessee has complete choice of pilots subject only to such things as certificates, rating, and meeting insurance requirements..

Here's the grey: If it has a reason to look, the FAA will look at what the real relationship is, not just was the paperwork says. The paperwork can say all it wants about the businessman who knows nothing about flying having the choice of any qualified pilot, but the FAA will look at what's really going on. You dry leasing your airplane to someone and coincidentally being the pilot they choose? I'd expect that to be closely looked at

This is actually a big deal and it has been an FAA enforcement priority since COVID. I've been involved in two presentations on the subject, one as panelist and one as main speaker.

So, aside from the usual, "only if I get caught," there are ways to do it properly and ways to do it improperly,

You know, I rarely respond to these type of threads, as I consider myself unqualified to answer.
That said, that was EXACTLY what my response would have been if I had responded.

 

[midlifeflyer]

I've heard this from a couple people.

I'm curious, what happened post COVID that made them want to focus on this?
Has their been an uptick in the number of cases with improperly certified individuals/aircraft offering on-demand transport, or more accidents or something?

I'm wondering if there's just more trainee pilots out there trying to get $/hours any way they can so they start offering services they aren't allowed to.

I don’t have numbers but my impression is that there were two contrary things at work during COVID which increased grey charter use.

One was less business travel, so less use of corporate jets. The other was avoiding the airlines for those who still traveled. The result was the increased use of multiple non-exclusive dry leases. Theoretical win-win. For the owner, some income for underutilized aircraft without Part 135 compliance costs. For the traveler, cheaper than charter for the same reason.

I think that world was the start, but there was a spillover effect into other areas of private aviation. As far as I could tell, the scrutiny has not been nearly as targeted, but in the pilot-oriented webinars I was involved in, in addition to the potential exposure for commercial pilots, we talked about demo flights, instruction, and, of course, public ride sharing.

(It’s too bad the FAA didn’t record them. I thought the webinar I led was regional - my local FAASTeam was the host - but we had over 300 attendees from across the country and we received a number of requests for a rebroadcast.)

 

[midlifeflyer]

Let them hire a different pilot. Make sure the lease is legitimate and there is clear tracking of who has operational control of the aircraft and when.

When they lease it it’s theirs. Not yours.

Keep the local fsdo in the loop.

You do this the way you’re describing and the fsdo finds out you’ll probably not like the outcome.

I agree with the rest, especially the second point.

But I wouldn’t keep the FSDO in the loop unless it was a Truth-in-Leasing aircraft with a requirement to keep the FSDO in the loop. Done correctly, it’s a private business transaction.

 

[RussR]

I understand why the FAA is strict on the matter. The issue I have with it is getting the comm rating is very limited on what you can for hire unless you go to part 135 and 121. For part 91 the certification is almost useless.

Probably a good 1000 or so of my hours are from flying other peoples airplanes for pay under Part 91. Everything from 172s to jets. There are lots of people who own airplanes to get them around to job sites, etc, who aren't pilots.

It's been pretty lucrative for me, at least.

 

[Tarheelpilot]

I agree with the rest, especially the second point.

But I wouldn’t keep the FSDO in the loop unless it was a Truth-in-Leasing aircraft with a requirement to keep the FSDO in the loop. Done correctly, it’s a private business transaction.

Indeed. An assumption on my part.

Missed the c-182 part.

I would keep that deal private as well.

 

[Tarheelpilot]

Probably a good 1000 or so of my hours are from flying other peoples airplanes for pay under Part 91. Everything from 172s to jets. There are lots of people who own airplanes to get them around to job sites, etc, who aren't pilots.

It's been pretty lucrative for me, at least.

Same here and some of the aircraft I crewed were leased.

 

[N1120A]

This is one of the reasons that flight schools will have their airplanes owned by a different entity than their flight school. That way, CFIs can do some for hire to renters. At least they have previously thought that way.

 

[k9medic]

I'll sling some mud into these waters...

We have a 6 share partnership on our airplane. The airplane is setup as an LLC and we run it as a business. Some will be quick to refer to the "flight department trap" from the IRS and they would be correct that we could be exposed to this. Here is the stupidity of it all... We have to have an individual dry lease for each partner for them to be able to use the plane even though they own 1/6th of the damn thing!

Our insurance company was super easy to work with as long as we had these lease agreements but if we tried to "dry lease" our plane to an other person outside of the 6 partners, we would have to pay a much bigger premium.

I have a great 10 page dry lease document if anybody needs it.

 

[Abram]

I have no particular expertise in this area, but have several friends that have done dry leases of their aircraft and I have been approached several times by people that inquire about it.

A dry lease is a perfectly legal and perfectly acceptable arrangement, provided it is done correctly and that operational control is transferred to the Lessee. As others have indicated, the FAA has identified this as an area that requires their attention and scrutiny because they want to eliminate any operation that operates or holds itself out as an on-demand operation without the required statutory compliance.

My understanding is that an aircraft owner can have up to five dry leases on their aircraft. The dry lease document is supposed to be filed with the local FSDO and the Lessee is responsible for all operating responsibilities and costs associated with the flight. As others have said, they are responsible for finding the pilot, but the pilot can be from a list you provide or from any other qualified pilot that is acceptable to both the Lessor and the insurance company. If you are the pilot hired for commercial activity on your plane, you must otherwise meet the requirements for that commercial activity. Aside from that, it would draw additional scrutiny from the FAA because it starts to look a lot like an On Demand Charter operation.

As a practical matter, I have only done one or two dry leases and have started to really scrutinize anyone that asks about them. Many people inquire and once I explain the economics of it, they tend to disappear. Many people seem to believe that using a private aircraft for travel is less expensive or about the same as commercial travel!

I have only had one person actually use the airplane on a dry lease and that person used it exactly one time, despite his verbal commitment to use it on a regular basis. Another friend of mine dry leases his airplane to one person, but has them pre-pay for 50 hours of use per year. That is how I would do it if I were to consider it again.

One more practical concern is that the insurance carrier will charge an additional premium for every dry lease you do and that has to be passed on to the person trying to utilize the airplane. There is additional exposure for the additional usage that was not contemplated in the policy inception and it is by definition a commercial use, so the policy will need to reflect that.

All-in-all, I have not found dry leases to be very practical but there are definitely scenarios where it can work if you follow the rules.

I hope that helps!

Abram Finkelstein
N685AS

 

[midlifeflyer]

My understanding is that an aircraft owner can have up to five dry leases on their aircraft. The dry lease document is supposed to be filed with the local FSDO and the Lessee is responsible for all operating responsibilities and costs associated with the flight.

The five dry lease limit is a typical GA owner insurance provision before they up the premium to "flying club." Increased premiums are also a possibility if the pilot you are leasing to has low time in type.

If you are referring to leasing to a pilot for their personal use, most of the problem issues are irrelevant unless the pilot you lease it to is using it improperly. Filing the lease document with the FAA only applies to "large civil aircraft" (aircraft of more than 12,500 pounds, maximum certificated takeoff weight).

 

[Abram]

The five dry lease limit is a typical GA owner insurance provision before they up the premium to "flying club." Increased premiums are also a possibility if the pilot you are leasing to has low time in type.

If you are referring to leasing to a pilot for their personal use, most of the problem issues are irrelevant unless the pilot you lease it to is using it improperly. Filing the lease document with the FAA only applies to "large civil aircraft" (aircraft of more than 12,500 pounds, maximum certificated takeoff weight).

Thank you for the clarification regarding when to file the lease with the FSDO. I believe that the rule also applies to jet aircraft regardless of the weight, but I am not certain.

I had assumed that in this case the Lessee would be a non-pilot, but I agree that most of the scrutiny will go away if the Lessee is a pilot using the airplane for their own personal use.

I was under the impression that the five lease rule was not a hard limit, but was a general rule for when the FAA would start to look at the Lessor more closely to verify that the operation is legitimate. The insurance limitation makes a lot of sense.

Abram Finkelstein
N685AS

 

[midlifeflyer]

Thank you for the clarification regarding when to file the lease with the FSDO. I believe that the rule also applies to jet aircraft regardless of the weight, but I am not certain.

I had assumed that in this case the Lessee would be a non-pilot, but I agree that most of the scrutiny will go away if the Lessee is a pilot using the airplane for their own personal use.

I was under the impression that the five lease rule was not a hard limit, but was a general rule for when the FAA would start to look at the Lessor more closely to verify that the operation is legitimate. The insurance limitation makes a lot of sense.

Abram Finkelstein
N685AS

Here's the reg. This is for leases. There may be other rules about information which must be supplied, such as in fractional ownership programs under Part 91, Subpart K.

There may be one but I'm not aware of any specific number of leases which raise the FAA's attention. It wasn't mentioned by the FAA inspectors I worked with on the webinar, but that doesn't mean one does not exist. Perhaps obviously, at a certain point, multiple leases to multiple non-pilots within a certain time frame brings in the quacking duck - it quacks like a charter.

 

[Let'sgoflying!]

We are allowed 6 dry leases at any one time.
There's a bit more to that however.
You can't have the Lessees constantly changing.
There is no specific rule but if you give someone a dry lease then after their flight or flights, you take them off and replace them with a new Lessee; that's going to be seen as Sham Dry Leasing.
(theoretically you could have a revolving door of dozens of Lessees which is unacceptable)
Your ops inspector would know because you must report each new Lessee to him/her.

From a practical standpoint one problem is the Lessee who signs on, and makes like they are going to be regular users of the lease - but in fact only have one or two flights in mind. That ties up Dry Lease spaces and hurts your business.

(A sideline from the OP's question.)

 

[midlifeflyer]

You can't have the Lessees constantly changing.
There is no specific rule but if you give someone a dry lease then after their flight or flights, you take them off and replace them with a new Lessee; that's going to be seen as Sham Dry Leasing.

...because, after all, what does that look like?

 

[flyingron]

This is one of the reasons that flight schools will have their airplanes owned by a different entity than their flight school. That way, CFIs can do some for hire to renters. At least they have previously thought that way.

The reason they do it is because flight schools are undercapitalized. It makes no operational difference under the rules whether the airplane is leased or owned. If the school provides both the instructor and the plane to the student, then they need 100 hours.

 

[midlifeflyer]

This is one of the reasons that flight schools will have their airplanes owned by a different entity than their flight school. That way, CFIs can do some for hire to renters. At least they have previously thought that way.

Flight schools lease aircraft for business reasons. What difference do you think it makes from an FAA standpoint?