Pre-buy on partnership plane?

[Irish_Armada]

Would you do the same level of robust pre-buy inspection on a partnership plane you were buying an available share of, as you would on a plane you would solely own? Just wondering if there was any etiquette to follow here, or deference to be given to the current partners. Thanks.

 

[ryoung99]

I would, but it also depends on how much cash is in the reserve account. Either way you want to know if you are buying into a problem. Also get a title check, the service through the AOPA is very complete for only $95, they also give you a very detailed history of the aircraft including accidents and major repairs.

 

[dukeblue219]

Personally, I didn't.

I own 1/4 share (with a 50% owner and another 25% owner). I looked over the plane carefully and flew it twice before writing the check. I got to know the 50% owner who was selling me another guy's 25% and I have good reason to trust his judgement on the condition of the plane. I knew he and the other guy fly it very regularly. Additionally, it wasn't anywhere near the cost of a new plane and it was new enough I was comfortable making the purchase with minimal fear of sudden maintenance needs (plus a good maintenance reserve helps too).

However, I don't think it would be unreasonable to perform an inspection, either -- perhaps you pay for an annual at your choice of mechanic, and if you end up buying, the other owners pay you back for their share of the inspection?

It's your money, so you have to do whatever you judge makes you comfortable and safe.

 

[wabower]

You have two due diligence projects to complete vs. just one if you buy the plane as sole owner. I would expect to spend less time on the plane and more time on the buy-in.

 

[Artiom]

I'm in the process of buying a share in C182. I spoke to the members and to the mechanic who does the maintanance and I'm quite confident I don't need to do a full prebuy. And as mentioned before overhoul fund helps a lot.
I think this is fundamental difference between buying a plane vs buying a share. You got this thing and it is all yours vs other members flying plus overhoul and maintanance funds. Makes me feel confident.

 

[dukeblue219]

You have two due diligence projects to complete vs. just one if you buy the plane as sole owner. I would expect to spend less time on the plane and more time on the buy-in.

That's a really good point. You really want to make sure everything is in order and understood by all parties when you make/buy-into the agreement. I would guess that questions of scheduling priority, maintenance issues, hangar vs tie down, your options to exit the partnership, details of the reserve account, billing, insurance, and so on are more likely to cause heartache down the road than the actual condition of the plane.

 

[weilke]

If you buy a minority interest in the plane, the bigger 'risk' than the mechanical status of the plane is the makeup of the partnership and the mental status of your partners. Will you be able to get along with them, fit into the give and take that a partnership requires.

I didn't do a prebuy. I looked at the plane, found it as represented by the seller. I did obtain a title-search on the plane and a records search on the corporation to make sure that neither had any liens, security filings etc. against it. I also had an aviation attorney look at the bylaws and share purchase agreement. After I spoke to all the partners and they decided that they wanted me in their group, I wrote a check.

 

[Non Compos Mentis]

I was offered half of a Bonanza that had been maintained by a mechanic I know well.
My pre-buy consisted of nothing more than asking his opinion of the airplane.

Vetting the partner(s) is more important than vetting the airplane.

 

[wabower]

Understanding the history of the entity can be equally important. What type of entity? Have timely tax returns and reports been filed? All debts paid? Status of litigation? Does your purchase of ownership include representations and warranties, indemnification, hold-harmless regarding these issues?

I was offered half of a Bonanza that had been maintained by a mechanic I know well.
My pre-buy consisted of nothing more than asking his opinion of the airplane.

Vetting the partner(s) is more important than vetting the airplane.

 

[Jaybird180]

I considered my risk and risk-tolerance. I saw thei airplane once, talked with a couple pilots, rode right-seat and then looked at the logs.

I was told that my request had never been asked before and they had to figure out how to accommodate. Seems that most people just write the check.

My request was based on the idea that I would be a sole-owner someday and I would use this experience as a practice run.

YMMV

 

[Non Compos Mentis]

Understanding the history of the entity can be equally important. What type of entity? Have timely tax returns and reports been filed? All debts paid? Status of litigation? Does your purchase of ownership include representations and warranties, indemnification, hold-harmless regarding these issues?

I consider this to be part of vetting the partners, not part of the airplane's pre-buy inspection.
Thanks for raising the question.

 

[jdangel]

I am currently in the process of converting over my solely owned aircraft to a co-ownership arrangement with two other people.

In our case the start of this arrangement lines up nicely with the annual inspection, so that is what was used as a "pre buy". Since no major issues turned up we are proceeding. It was good also I think for the other two people to see that annuals always turn things up, and it is rare to get off with zero items to be worked on.

YMMV. I did a pre-buy when I first bought this plane, which amounted to just a look-see and ended up with the classic expensive first annual inspection next time around.

Jeff

 

[Irish_Armada]

Thanks for all the input. The plane does have a nice reserve built up already so that does make it a bit less risky. And I will be sure to look closely at all the buy-in details. Thanks again.