AIRCRAFT SYNDICATES

[Rogerm]

Just after the collective wisdom about syndicates, the good, the bad and the downright ugly.

 

What to watch out for, how did you do any due diligence, etc.

 

Thanks in advance

 

 

[facthunter]

About the same as picking a partner for life. They CAN work but often don't.. People being what they are. If you wish to go ahead try to write rules covering all problems you might encounter.. How to dispose of an interest. How ongoing costs are apportioned Fix an hourly rate to go into an account . If it's close you won't have to pass Around the hat and the ones who use it the most will have kicked in the most.. Next who gets to use it at weekends.? Retired people can use it during the week most times etc but perhaps not always. and so on. It can help to get more use from a plane. which reduces the fixed costs/Hr figure. Pilot experience will affect insurance costs too especially with Tailwheel There I've said more than I meant to.. Nev

 

 

[Old Koreelah]

It probably should not be a 19-Reg. If blokes like me were part owner, they'd always be buggerising about making improvements - which would likely lead to some friction.

 

 

[Bruce Tuncks]

All things come to an end, and the syndicate will one day. You need to have it clear at the outset just how this will happen. My suggestion is that the departing member has to find a sale, and the remaining partner can decide to accept half or pay half. ( for a 2 man syndicate )

 

Maintenance costs ( in time and money ) need deciding too. Plus the things Facthunter and Old Koreelah pointed out.

 

It is way too easy to mentally gloss over details but be assured they will bite you one day if you don't get it right.

 

 

[Ironpot]

I tried to form one once - spent a lot of time on it. First a 3 way then just two but it just got so complicated that I realised it was never going to be perfect. I ended up going out on my own.

 

Im aware that there are successful syndicates at Moorabbin etc but Ive got a feeling that they are operated by solicitors and accountants!

 

 

[facthunter]

They would have to work OK if that is the case. Lol.. It's not easy or guaranteed. I've never done it myself, though I've been part of a consortium with construction and multiple occupancy of a hangar. That was compromised to an extent but successful to a point. The Hangar is there and being used.. Nev

 

 

[Bruce Tuncks]

My first aircraft was in 1974 and was a new Libelle in a syndicate of 3. Two of us paid, but the 3rd got sick and never paid. Just an example of the things that can go wrong, we sure didn't think of that possibility in our early enthusiasm.

 

 

[Jerry_Atrick]

Stating the obvious, one has to do their homework very well. My first syndicate membership was based on the personal recommendation of a friend whom I trusted (and was a member of) and it largely worked. There are some bumps and disagreements on the way, and while this was a relaxed syndicate in terms of stated rules, the one rule that did matter was that whenever there was contention, there was a simple vote - majority wins (although it was a syndicate of 8 and in the 4 years I was a member, we only had two votes, both won or lost by a clear majority).

 

I sold my share 2 years ago and haven't found another suitable syndicate closer to home since. Some things to beware of - onerous conditions of selling your share, onerous restrictions on booking, ensuring there is sufficient funds in the account or that the other members are solvent and can afford cash calls, is there a designated administrator and/or maintenance coordinator - much easier, that there is a vetting procedure available to all existing syndicate members when taking on new members, that there is a protocol for deciding contentious issues, that there isn't any member that is in arrears and that payments are made promptly, the serviceability of the aircraft and its history (and the willingness of the syndicate to show you/walk you through the maintenance history - has their been recurring problems, is there a large number of inop instruments/aviaionics, etc); does the tech log look like there are cowboys in the syndicate; what are the shared responsibilities (keeping it clean, flying to maintenance base if not at home base, etc); if you want a bit of a social life within the syndicate, are their members who often fly with other members, etc.

 

Taking Old Koreelah's point, probably best to stick to Cert of Airworthiness aircraft because they are a lot less flexible with what owners can do to them.

 

(BTW, not sure in Aus, but in the UK, they syndicate can be forced to wind up and sell the plane if one member (of legally up to 20) decides they want out and a buyer can't be found - there was a collective sigh of relief when I purchased my share as I believe that is what the seller was threatening - thankfully it didn't could my friend's judgement).

 

 

[Bruce Tuncks]

Thats interesting Jerry. But how would you get a price in the absence of a buyer?

 

 

[Jerry_Atrick]

In the absence of a buyer, the syndicate continues and the seller has to contribute. However, my understanding is (and it is only my understanding) that the seller can compel the syndicate to keep dropping the price or sell at auction - though this would require a court order and costs would be met by the seller unless the price asked was manifestly in excess of the market value of the aircraft (presumably as estimated by a broker/surveyor). Of course, to enforce this would involve the courts, so syndicates usually come up with their own arrangements. In our case, we would agree a buyout price and either each remaining member would contribute equal share to buy it out, or the keys would be returned and the requirement for the seller to pay their monthlies + cash calls would be waived until they met the price of the share. During this period the keys were withheld from the seller (it apparently happened once before my time on the syndicate).

 

This was my beauty

 

Light Aircraft, Share Of Warrior 2 @ Fairoaks - Price Reduced, Shares & Groups, advert ID=33414

 

Mind you, when I photographed her, she was about 6 months after a bare metal respray - took about 12 months to sell her.. and I discounted it to £3k or thereabouts... Sacrilege and selling her is now a decision I absolutely regret.

 

 

[Bruce Tuncks]

Yep, staying away from court is a good idea.Many years ago, this syndicate went to court over a ( then) $15,000 glider, saying the government was at fault for giving it a certificate of airworthiness. Well they lost the case and had to pay $90,000 costs. Well court was only intended for rich people, they sure proved that.

 

We do have small claims courts which are cheaper but limited to small stuff.