A candid reflection on FAA aircraft hangar leases and hangar reversion policy

Frequently, members all over the country come to AOPA for our understanding of FAA guidance. One of the most contentious topic involves FAA aircraft hangar leases and hangar reversion policy. AOPA hopes to shine some fact-based light on this subject to assist airport sponsors (towns/counties/ports/states that are the public airport “owners” and are accountable to the FAA) and airport users alike and is working to clarify these requirements to improve communication among all involved parties. Additionally, the FAA could and should in the future eliminate misinterpretations like these with clear and unambiguous policy guidance.

Most recently, AOPA members at Ogden-Hinkley Airport in Utah and Mahlon Sweet Field and Bend Municipal Airport in Oregon reported that airport administrators were advising hangar owners that decisions to enforce reversionary clauses in leases were due to some form of FAA “requirement.” By using their own unique interpretations of the FAA compliance manual, they justified unpopular actions that impacted airport users, hangar owners, and hangar tenants.

With respect to leases, while it is clear that the FAA intends for airports to maintain control of airport grounds and ensure that the airport is afforded the opportunity to reevaluate the highest and best use of the land at reasonable intervals, and that reversion is one acceptable way to terminate a lease, nowhere in FAA guidance is it mandated that sponsors must revert privately owned hangars to the sponsor. To the contrary, in a 2006 FAA Part 16 case (16-05-19 Clarke v. City of Alamogordo), the FAA determined that neither the existence nor the exercise of reversionary clauses is required by sponsors and as such, neither the absence of such language nor failure to exercise reversionary clauses will in and of itself constitute a violation of FAA airport compliance policy.

The AOPA position on reversion clauses in leases is that although according to the Airport Compliance Manual (FAA Order 5190.6B)—which helps the FAA determine if airports are compliant with grant assurances—reversion is one acceptable way to terminate a lease, there are many approaches to terminating leases that offer alternatives more akin to a win-win situation while simultaneously ensuring that the airport continues to honor principles of self-sustainability. When our members are evaluating a potential hangar lease, it is critical that they thoroughly read the lease and think about their financial position if the airport chose to exercise any lease provision, to include reversion if it is written in the lease.

Some reasons why AOPA recommends against reversionary clauses include (but are not limited to) the following:

• Among other things, members often speak of the difficulty getting financing for construction of hangars if the lease had a reversionary clause, and as a result, often choose not to build at airports.
• Particularly where large investments were involved and understanding that hangar reversion is one of several acceptable forms of terminating a hangar lease, members often view exercise of a reversionary clause as “a taking” (an incorrect perception) resulting in ill will and a corresponding disincentive for private investment in general at the airport.
• Unless airports have had previous experience managing hangars as an “owner” and made significant investments in staffing and training required to take on this new line of business, hangar maintenance and management presents new and sometimes unexpected challenges for airports not completely ready to make the transition from land leases only to land and hangar leases.
• Airports that have removed reversionary clauses from their leases did so in part because of the following:
  • Some hangar owners deferred maintenance to the hangars as the deadline for the ownership reversion neared, which resulted in the airport gaining responsibility for expensive maintenance items like overhead door replacement, roof repairs, or other deferred maintenance.
  • The administrative burden of converting the improvement (hangar) from a non-tax-exempt asset to a public, tax-exempt asset. This often takes a significant amount of staff time to complete the transition.

While airport compliance with FAA grant assurances is required to maintain eligibility for vital FAA Airport Improvement Program (AIP) funding, most of the information found in FAA Order 5190.6B is intended as guidance for FAA compliance staff and is subject to interpretation. Where FAA Order 5190.6B addresses lease policy, there are several frequently misinterpreted subtopics that are often discussed between airport administrators and airport users that we address below.

FAA Order 5190.6B guidance does not mean:

• That separate new leases may not be issued if the cumulative total of the leases on a given hangar exceeds 50 years. What the FAA does expect is that in general, no single lease document exceeds 50 years.
• That hangar reversion is required for privately owned improvements (hangars) that exceed 50 years of age.
• That a new lease may not be issued to a private hangar owner when the asset is over 50 years of age. For example, California S.B.654, signed into law in 2023, supports this notion. AOPA published an article detailing the bill and supporting this perspective.
• That the mere existence of a reversionary clause requires an airport sponsor to exercise it.

Bottom line: The FAA accepts reversion as one way to terminate a lease, but doing so is not required.

Our members have reported that some airport administrators referred to a case where an airport was found noncompliant as evidence to support their notion that the FAA “requires” reversion. Citing a section from Airport Cooperative Research Program Report 213 (Estimating Market Value and Establishing Market Rent at Small Airports) one such example mentioned was the 2018 case where the FAA found Shreveport Downtown Airport in Louisiana noncompliant due to the airport's failure to exercise reversion clauses in leases. Allegedly some airport administrators have used this case as an example to justify the claim that there is an FAA "requirement" to revert private hangars at their field. However, upon deeper inspection of the Shreveport case, it becomes clear that the noncompliance finding was due to a myriad of factors, the existence of nonstandard lease agreements contributing just one small part—but some airport officials have apparently singled out the statement that addressed reversion clauses to help justify the direction their airport appears to be heading with respect to airport lease policy.

The FAA Land Use Compliance Inspection memo from the Shreveport case states, “The failure to exercise this reversion clause or implement a suitable lease alternative seriously affects the ability of the airport to generate revenue necessary for airport needs.” Taken in context, this inspection memo plainly states that the FAA objected to the airport's overall management of leases rather than solely singling out Shreveport's failure to exercise reversion. This reinforces the AOPA position that FAA policy provides no specific mandate that airports must revert private hangars. The liberal invocation of phrases like “The FAA requires…” without clear citation of an actual FAA mandate, coupled with frequent use of outside legal or airport consulting firms that tend to provide opinions that support airport administrators’ desired interpretation of FAA policy, diminishes trust between the airport sponsor, the airport administration, and airport users.

Airport sponsors already have broad and far-reaching powers and should justify actions based on federal airport policy and local authority as well as standing laws rather than attempt to influence airport users, hangar tenants, and hangar owners’ perceptions by conveying that the FAA is forcing the hand of the airport sponsors. Further, airport owners should not suggest that a failure to comply with an unpopular action will jeopardize the airport’s compliance with FAA regulations, thereby rendering the airport ineligible for FAA AIP funding without ample evidence that a given action will definitively result in a noncompliance finding.

AOPA regularly communicates with and advocates for our members at airports, remaining in constant contact with the FAA, state aviation divisions, airport management associations, airport administrations, and airport consultants nationwide to remain informed and involved in ongoing conversations on this issue. The FAA could (and should) provide clarification of its compliance-related expectations with respect to what is and what is not required in how hangar leases are administered.