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Pilot's Guide to Co-OwnershipPilot's Guide to Co-Ownership

Importance to Members

An aircraft purchase, new or used, is always a significant investment. A common and simple way to diffuse this cost is by sharing the expense with other purchasers. A co-ownership agreement can halve, or even quarter the cost of ownership. This subject report provides information on how to properly set up a tenancy in common or a joint tenancy. The Q & A section provides answers to commonly asked questions, but if there is information you still need, don’t hesitate to call the Pilot Information Center at 800-USA-AOPA (872-2672) Monday through Friday, 8:30 to 6:00 ET. AOPA’s aviation technical specialists would be happy to help you.

Overview

The Co-Ownership Concept

The concept of co-ownership is very simple. It is nothing more than two or more individuals sharing the responsibilities of owning an aircraft. Obviously, when you spread the costs of aircraft ownership among multiple owners, your costs decrease. The apparent simplicity of this arrangement is what attracts a number of aircraft owners to a co-ownership arrangement.

In a co-ownership arrangement, you have the opportunity to select the co-owners, choosing people whose aircraft needs and flying habits complement your own. The term "co-ownership" is often used interchangeably with "partnership." However, these two arrangements are not technically the same. A partnership involves an association of two or more persons who carry on as co-owners of a business for profit. Therefore, a partnership involves something far more complex than simple shared ownership. The objective of a partnership is to make a profit. So, if all you want to do is share the ownership of an aircraft with another person, you will be co-owners, not partners.

There are different types of co-ownership arrangements. The most common is called tenancy in common. The other general type of co-ownership is called a joint tenancy. In a tenancy in common, the co-owners are called tenants in common or co-tenants. In a joint tenancy, they are called joint tenants.

The most important distinction between these two forms of ownership has to do with the disposition of each co-owner's interest when he or she dies. The interest of a tenant in common passes to a person's heirs according to his or her will, or according to state statute if there is no will. The heirs and the surviving co-owner(s) then become tenants in common. The joint tenancy, on the other hand, is characterized by a right of survivorship, which means that the interest of a deceased joint tenant passes to the surviving joint tenant or tenants. In the context of aircraft co-ownership, this would mean that if you die, your share of the aircraft would go directly to your co-owner and not to your heirs.

In most states, a co-ownership arrangement is presumed to be a tenancy in common and will only be considered a joint tenancy if that provision is explicitly created. Even the use of the term joint tenancy or joint tenants is not a clear enough expression to create a joint tenancy in most states because people often use such terms in a non-technical sense to refer to a tenancy in common. Therefore, if for some reason you wish to create a joint tenancy, you should expressly refer to the right of survivorship in addition to using the terms joint tenants or joint tenancy.

Once you have made your decision to enter into a co-ownership arrangement, your next important step will be to sort out the obligations of each of the co-owners. We strongly suggest that you take the time to draw up a list of "ground rules" for each co-owner to abide by. The next step is to take this list to an attorney who can draft a co-ownership agreement that will bind all the co-owners. The extra time and the relatively small additional expense involved in doing this will far outweigh the risks of disagreements and misunderstandings that are bound to occur down the road.

Co-Ownership Agreement Checklist

To help you and your attorney put together a co-ownership agreement, here's a checklist of some essential matters you should include in your agreement.

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Co-Ownership FAQ

Let's take a look at some specific questions we frequently hear from members.

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