No "capital required" groups

[onehunga]

Have seen a few of these no capital required groups offered from time to time in various mags.

Wanting to keep my hours ticking over whilst undertaking my ATPL's and it almost seems to good to be true.

Are there any snags?:)

[Genghis the Engineer]

It's usually a private owner trying to keep his utilisation up.

The snag then, is generally that he's going to have absolute priority over use of the aircraft, so you're likely to have a little less flexibility on availability. But, for what you're after, the odds are it'll work out.

G

[Monocock]

Isn't that just a hire agreement?

[Genghis the Engineer]

Sort of. I think what generally happens is that the real owner writes the rules, sells you a share for a pound with the written condition that you can/must only sell it back to him. Of-course with this sort of arrangement he can't legitimately make a profit, only have you paying actual operating costs.

So, the owner gets useage up, and hourly costs consequently down, somebody gets cheap flying with restrictions, and the CAA doesn't actually see any rules broken. Legally grey, but probably safe - which at the end of the day is what really matters.

I belonged to one for a while that belonged to an RAF station flying club, it worked.

G

[Flyin'Dutch']

Hi G,

Unless the machine is on a PT CofA it would likely be illegal.

To be a co-owner you need to have at least a 5% stake in the plane, few would be worth only £20. :)

Happy to bow to your greater knowledge but that is how I read it.

FD

[Thrifty van Rental]

Interesting point Dutchy.

A flying colleague of mine regularly rents an N-reg 172 from a local owner, and does not have a capital stake in it. Do you know how that works? Obviously it is just a part 91 aircraft. Does that make the arrangement illegal?

[Hersham Boy]

Surely the agreement with the owner could be that you buy a share for 5% of value with a guaranteed buyback at same rate from, and only from, the owner?

Means finding some cash to outlay in short-term but you get it all back...

Hersh

[Thrifty van Rental]

Hersham Boy

Congratulations. Comparing the title of the thread with your posting, you seem to have invented a new concept

The No Capital Required Group, that requires Capital. :D

[Hersham Boy]

Merely a response to the traditional request for "one free lunch, please!". ;)

No loss in capital next best thing to no capital at all, no?

Anyone got any info on that "no fuel required" flying I keep hearing about? :D

[onehunga]

Thanks for clarifying matters. The hunt continues then....

[FNG]

An owner may sell a 5% share in an aircraft for any price, including a nominal price with an option to buy back at the same price. As long as the share is genuine (so that, for example, if the aircraft is written off the shareholder is entitled to 5% of the insurance pay out), then Article 130 of the ANO will be satisfied.

[BlueRobin]

Yes, but you all seem only to understand the concept of group ownership. :p There is such thing as "membership" where you don't actually own the aircraft and is thus a "no-capital" group.

Two "snags" I have come across...

- You need to prove to the owner that you are a sufficiently competant pilot to fly his/her baby

- There may be a minimum term contract on the monthlies.

Some membership schemes require a deposit, of which, a quantity may be non-returnable.

See the PFA Group Flying booklet, available to order on their website or by telephoning them at HQ.

[FNG]

If the aircraft has a Certificate of Airworthiness, see ANO 130(2)(c). If a payment is made for the right to fly the aircraft, the flight is a public transport flight, for the purposes of the C of A provisions in part III of the ANO, unless one of the exceptions indicated later in the article applies. The aircraft will therefore require a transport category C of A. This is how a PPL rents an aircraft from a flying club. You can't rent an aircraft which has a private category C of A.

If the aircraft has no C of A but operates under a permit to fly, I would be surprised if it could be rented, but perhaps the PFA has worked out some arrangement here that the CAA is happy with.

PS: Thrifty, I can't answer your question about the N registration aircraft as the answer would depend on US Federal regulations rather than upon the ANO.

[Kolibear]

This arrangement sounds the sort of set-up that most PPLs are crying out for.

As a student at a flying club, your hourly rate also pays for the clubhouse, electricity, salaries, etc, etc. And as a PPL, you are still paying for these things. Now I appreciate that that the a/c is 'owned' by the club, you are using their facilities and should pay accordingly. I've always thought that the PPL hourly rate is too close to the student rate.

It strikes me that these type of groups are a good half-way point between Club hire and Group ownership, but I'm sure that there must be a catch in it somewhere.

[SlipSlider]

I have always understood that it is not the Capital costs that must be shared, but the Operating costs - demonstrated, should it be required, by meticulous record keeping of cost allocations. I checked this by phone with the CAA a few years ago and confirmed that was the position.

My experience is that 'democratic' groups (ie equal capital, equal voice) can in certain circumstances be a nightmare (guess who speaks from bitter experience...! :( ), but benign dictatorship works extremely well - emphasise 'benign'! No squabbling, have a discussion by all means, and then what the owner says, goes! And if you don't like it, go - having given the previously agreed notice of leaving, put in place to protect all the remaining members from sudden hikes in their costs.

But definitely, no question of profit or hire, or unequal contributions such as reduced hourly rate for the owner.

This is a question that has been asked a couple of times. It must be possible to get a clear statement from the CAA.....

[Genghis the Engineer]

I did earlier use the term "legally grey" and I think I was right to do so.

A fairly senior manager at the CAA told me a while ago in conversation "if you can't afford the answer, don't ask the question".

I'd suggest that so long as what's going on is (a) safe, and (b) not outright illegal, asking for a definitive answer from the Gnomes of Gatwick would be a very bad move indeed since the odds are that instead of contentedly looking the other way, they'll be forced to say "NO".

Kolibear - if clubs don't make the money to run from their rental rates, they'll make it from runway, hangerage and membership rates. You'll still pay them ! If you want cheap flying, go to a true non-commercial club and operate there in a true members-run syndicate, but be prepared for the inevitable club politics.

G

[18greens]

Surely the only catch in this is the owner has total say in the ac.

So if it has a dodgy VOR but he never uses it it is unlikely to be fixed.

Likewise if he wants to move it elsewhere he can without asking anyone.

BUT the aircraft is not being used enough, that is why they look for other pilots to offset the fixed costs and doing something unpopular like moving it will lose the revenue stream.

The other side is if any bills etc come in (and they do) it is down to the owner.

I agree with Slipslide about benign dictatorship and since the share is no capital involved you are free to exercise your vote with your feet at any time. Try that with a capital share group that does not get on.

I think they are a great deal, long may they last.

[Oscar Duece]

How can it not be legal, unless you (the owner) charge less than the actual cost of the flight direct costs (fuel) and are not in the aircraft.
Surely you (the owner) are operating just like and club, limited company of sole tradership. Ie offering the plane for rental. for a fixed cost, at a profit to the fixed costs, to cover the variable costs. As the long as it's a p-transport aircraft what's different. You both don't need an AOC. Any the persons flying the aircraft are 'club' members, not shareholders. You don't need your own office, hanger, bar ??? to be a club.
As the pilots are not share holders, you can have as many as you wish, just like any other club. And as a club you can ask for a 'security deposit', membership fees and form rules.
Yes it would be treated as a business by IR, so if you made a profit, you pay tax. Or if like someone I know it is part of your limited company it either goes on or comes off your bottom line.

I can't see any grey in that.:confused: :confused:

[FNG]

Indeed, nothing grey at all if you have a transport category C of A, and this is how rental clubs without premises operate, but I got the impression, perhaps wrongly, that there was a suggestion of running a non-owning membership scheme on an aircraft with a private C of A.

[SlipSlider]

To illustrate the view that it is operating costs (both fixed and hourly), not capital costs, that must be equally shared, how about this - is there any rule that actually requires the owner of an aircraft to even be a pilot? For example I bet there are one or two pilots whose planes are in their (non-PPL) spouses name.....

Take this example: doting Aunt, doesn't fly, would never go up in one of those things - but she knows her favourite nephew does, and is a very discerning type of pilot so she buys a PFA Permit plane (naturally, he's a discerning pilot!) which she will let him fly, but owns it herself as, say, she has already used her tax-free gift allowance or maybe just likes telling her friends that she owns her own aeroplane!

Nephew pays 100% of the hangarage and insurance, all the fuel etc for the hourly costs, and charges himself £X per hour with the balance over the consumables going to an engine replacement fund. Legal? Yes, imho.

OK, bring in said-nephew's PPL cousin; with Aunt's permission they share the hangarage and insurance costs 50/50, and each pay the same £X per P1 hour. Still legal? Again, yes imho. And no capital ownership.

So if the above example is right, it should not matter who is the owner, as long as all the operating costs are split equally, and there is no suggestion of profit / hire / subsidy etc

Or am I missing something?
Slip

[GRP]

I'd hate to be standing in front of an inland revenue inspector trying to explain that one. I'm sure they would consider your sole use of somebody elses capital asset as a taxable benefit! They've got pretty much everything else covered!!

Just picking up on one or two comments suggesting that the 'member' or 'no capital' arrangements could end up with broken equipment that the 'greedy owner' would not fix (my quotes).... this seems to me to be bracketing aircraft owners with dodgy landlords. I own an aircraft which I rent out to people. I rent it out because I need to cushion the fixed costs somehow and because it does an aircraft no good at all to be underused and I decided to buy the aircraft and 'control' it simply to avoid the politics that I have seen in a lot of groups. On my aircraft, if I want to upgrade the radios or install a new autopilot I only have my own conscience to argue with (and the cash to find of course)! The point though is that whether it be a membership scheme, a no capital group or just plain rental, the amount coming in is unlikely to provide a 'profit' and the owner can probably at best hope to break even (and to do that is paying the going rate him/herself for flying hours). There is no great incentive there for an owner to keep an aircraft in a substandard condition. I suspect that in the majority of cases the aircraft is the owners pride and joy and will be treated as such. This is certainly true in my case and to be honest I think the people who rent it from me are getting a good deal. I don't resent them that of course - it is a two way deal in that those people are allowing me to own the aircraft in the first place.

Having operated the 'rental' model for a couple of years I am currently giving great thought to the 'membership' model for two simple reasons.

1. To attempt to get people to commit a little more to the aircraft so I can better plan the payment of bills. It is very easy to get completely caught out by a long spell of bad weather coinciding with a large bill!

2. To engender more of a group feel. I have a fairly small group of people who rent my aircraft on a regular basis. This has worked well up to this year but recently I have started to see people making all manner of 'precautionary' bookings and then simply not turning up once they have flown the amount they wanted. A 'membership' scheme with some sort of democracy may help to get people to cooperate over the bookings rather than compete for them. Similarly, occasionally I see somebody book the aircraft for a week and I find out later that it has been parked up 45 minutes flying time away for the whole week. This is not really fair on me and it is also not fair on the other 'renters'. Hopefully a membership scheme might provide the required social pressure to stop this sort of thing. Who knows??

The difficulty I see in implementing this scheme is to work out how to pitch it in terms of 'membership fees' versus 'flying charges'. I have a range of people who rent it, some of whom might fly only 5 or 6 hours a year up to people who fly 40-50 hours a year. One intrepid sole has done 40 hours this year already (mostly on a single trip!). Any ideas on that one would be most welcome!!

Graham

PS. When I said I only have my own conscience to argue with.... I think I probably meant that I only have my better half to argue with!