A group of Ogden, Utah, private aircraft owners is taking the city to court over what it claims is an attempt to take over their hangars without paying for them. According to the Standard-Examiner, the Ogden Regional Airport Association claims a city policy change last April over lease agreements at the airport will allow the city to exercise what are known as “reversionary rights.” That means that when leases for airport property expire and are not renewed, the city assumes title to the assets that remain on the leased property. Some of the leased lots are home to hangars worth hundreds of thousands of dollars. Owners can, of course, remove the hangars but the suit claims it’s “very unlikely that tenants will voluntarily incur the cost of removing existing hangars at the end of term.”
The suit also suggests the city led hangar owners on, and “intentionally instilled a reliance that … leases would consistently be renewed to encourage hangar owners to invest hundreds of thousands of dollars into their hangars so that the city could obtain ownership of the improved hangars for facility leases prior to the hangar owners seeing any significant return or realizing the full benefit of the leasehold improvements.” The suit also invokes the Fifth Amendment of the Constitution, which says “private property [shall not] be taken for public use, without just compensation.”
When the new ordinance was adopted last April, city lawyer Gary Williams told the city council that the measure was a shot across the bow warning the private hangar owners the city has plans for that part of the field. The city is hoping to draw aerospace companies to the area as part of a redevelopment plan. Mayor Mike Caldwell told the newspaper the city is on firm legal ground but declined further comment. Ironically, the new ordinance offers much longer terms to the future occupants of the redeveloped areas. It allows the airport manager to offer leases of up to 40 years. The current lease term for land occupied by private hangars is 15 years.
I’m confused. Did the owners choose not to renew the lease or did the city not allow them that option?
The city refuses to renew the lease and takes over the improvements.
California takeover of Utah nearly complete.
It’s happening in Arkansas too. Cities are scrambling for revenue any way they can get it – moral or immoral.
I don’t see how this is American.
I suspect it will be like retreating forces in wartime. Destroy any equipment left behind so it can’t be used by the enemy, except in this case the enemy is the US government. Not so unusual I suppose, but not what I would suspect in Utah.
Leave only leveled hangars.
There are clauses in the new leases that prohibit intentional destruction of improvements by the tenant at lease end.
One more reason why building a hangar on leased land is a bad idea. I’m no lawyer, but it seems to me that the city changing the rules in the middle of the lease terms sounds like breach of contract. If they notified the hanger owners that, on renewal of their leases, they would be subject to the new conditions, that would be fair, but changing the charter without any recourse from the tenants should be illegal. Unfortunately, the city probably holds all the cards. I agree, if they wanted my hangar, they could either compensate me for the improvements, or come clean up the debris.
The problem is that the Lease Terms are not retroactive, but when it comes time to renew the initial lease the new terms will apply. This is happening everywhere because municipalities are scrambling for additional revenue. If they can refuse to renew the lease then the improvements (building) become municipal property.
Can’t speak for Utah, but this is how land lease works at airports where I’ve operated. When your lease is up, the land and any improvements revert to the city/county. Although the term is usually 30 years or more, so you have time to get your money’s worth out of those improvements (hangars). There’s no guarantee of renewal by either party. That’s why the term is what it is. Sounds like these guys spent way too much when they only had a 15 year lease.
Chances are that their initial leases had a renewal provision at the agreement of both parties. If the tenant followed the rules and wanted to renew a lease then they always could. The new thinking is the city won’t agree to extend the lease so the improvements revert to the city’s ownership.
An airport where I hang out has the same arrangement and same threat, and the lease term is 1 – count ’em, ONE – year. If the city doesn’t renew your lease I guess they take everything left on the lot. They wanted to bring in “aerospace” companies too and now they have a big very slightly-used factory building standing empty on airport property.
Strange.
You don’t own the land you _had_ leased.
Why should you be free to leave your property on it when you are no longer leasing it? That blocks lessor’s income from leasing to someone else – then you are controlling lessor’s property.
Is there a similar situation with space rented in commercial buildings? “leaseholder improvements” which can be substantial for a fancy retail store.
You’ve missed the point. The city WANTS the hangers (for free) so they can reap the revenue stream generated by leasing the space to others. Cities are changing their leases to remove guaranteed renewal rights and add reversion rights. I was attempting to purchase a hanger last year and the city would not transfer the lease with 12 years left on it, no reversion clause, and a guaranteed renewal clause. Their new lease was for 20 years, no guaranteed renewal, and new reversion clause. So I would only have 20 years before the building would be taken for free by the city.
That’s true and I agree Keith. This is one of the reasons I would not build or buy a hangar and I think it’s a bad investment for many people but there is this from the article:
“The suit also suggests the city led hangar owners on, and “intentionally instilled a reliance that … leases would consistently be renewed to encourage hangar owners to invest hundreds of thousands of dollars into their hangars so that the city could obtain ownership of the improved hangars for facility leases prior to the hangar owners seeing any significant return or realizing the full benefit of the leasehold improvements.” The suit also invokes the Fifth Amendment of the Constitution, which says “private property [shall not] be taken for public use, without just compensation.”
If the (hapless) owners were mislead they may have a case. They will lose but they have a point.
This story is being repeated all across the country. Either the municipality wants to take over the hangar and jack up the rental for it, or they have some hot scheme to convert the property to a more lucrative use such as manufacturing. When you elect to build on leased land you must always expect that the lease will not be renewed and be reasonably sure will will be able to amortize your investment within the lease period.
A similar situation exists with residential “airpark” property when the residents are not the owners of the airport.