HomeMy WebLinkAboutLease Policy Rec AAC Review Revised Final3-11-21 Page 1 of 5
BOWERS FIELD AIRPORT ADVISORY COMMITTEE
TO: Kittitas County Commissioners
FROM: Airport Advisory Committee
DATE: March 10, 2021
SUBJECT: Airport Leasing Policy Recommendations
General Lease Policy Statements
+ The need for a new lease structure for the airport is immediate. The lack of up-to-date
lease documents is impeding development needed to increase airport revenues and utilization.
+ While general lease policies and requirements should be consistently and uniformly
applied, it is reasonably anticipated that all but the most basic situations—apron parking and T-
hangars, for example—will require some level of negotiation and document modification,
particularly when valuable and/or specialized improvements, longer terms, unique needs and
uses, and tenant financing are involved. Accordingly, lease documentation should be developed
with reasonably consistent terms and adaptable to varied situations.
+ All existing leases should continue to be honored according to their terms.1 However,
existing tenants should be given the option to convert and efforts should be made to encourage
their conversion to the updated form of lease and current rent schedule through the use of
incentives such as extended terms, options to renew, and stepped rent increases.
+ No distinction or special accommodation should be made because a prospective tenant is
a public, private or non-profit entity.
+ Tenants holding leases with 50 year terms should have the first right to release the
property and improvements at the end of the lease term if the county elects to put them up for
lease.
+ A tenant should have some method of recovering the residual value of tenant
improvements to the property at the end of the lease term – a right to sell to a new user; appraisal
and purchase by the county; right to negotiate for a new lease on then existing rents and terms; or
similar.
+ Tenants should be able to sell improvements and assign the lease during the term so long
as the assignee meets county requirements.
1 To the extent of any presently existing legal deficiencies, such as lack of signatures or acknowledgements, they
should be corrected.
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+ Rents should be based on a fixed rent schedule with preestablished rent increases every
five years, rather than being adjusted based on inflation factors or periodic market or adjustment
to market studies.
+ Tenant improvements should be subject to an airport design and construction schedule
review prior to submitting for a building permit.
+ A party wanting to construct new improvements would negotiate and sign a lease and
proceed with the design/engineering/approval process. If that process is concluded to mutual
satisfaction, the building permit would issue and the lease commences. If not, the lease
terminates.
Recommended Lease Terms and Conditions
1. Term of Leases
1.1 New ground leases of unimproved land for the construction of new improvements
should be for up to 50 years with a 30-year prime term with up to 2, 10-year
options to extend being preferred. Options may be executed in either 5 or 10-year
segments as agreed upon between Lessor and Lessee not to exceed 20 years in
total.
1.2 Existing ground leases with existing improvements and for county owned
buildings, either of which are converted to the new lease form should be for 10 to
50 years depending upon improvement condition. For example, improvements
constructed within the last five years should have a 50-year term but one 23 years
old in good condition possibly should get a 10-year term with one or more 5-year
option to extend.
1.3 County T-hangars should be for 1 to 5 years with one option to extend for up to 5
years
1.4 Ramp space should be month-to month
2. Rental Rates
2.1 $0.14 per square foot per year for all ground leases
2.2 North T-hangars (presently $125/mo) $175/mo for first two years, increasing to
$225/mo for last three years
2.3 South T-hangars (presently $125/mo) $190/mo for first two years, increasing to
$250/mo for last three years
3. Rent Escalation – Fixed increases of ground rent should be 7% per five years,
rounded up to the next half cent.
Example: $0.14 x 7% = $0.1498, or $0.15
4. Options to Extend Lease Term – [Note: options to extend run in-favor of the tenant; do
not provide the county with an opportunity to deny its exercise; and must specify from the outset
of the lease the rent to be paid during option period together with all other changes, if any, to the
prime lease terms.]
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4.1 Leases with primary terms of more than five years – the number and length of
options to extend should be negotiable
4.2 T-hangar leases – options to extend 3-5 years negotiable
4.3 50-year leases have no options to extend
5. Right to Release – For expiring leases where no options to extend remain, the tenant
should have the first right to enter into a new lease at then current rent, terms and conditions if
the county elects to relet the property
6. Disposition of Tenant Improvements at Lease Termination
6.1 County has the right to purchase improvements at their then fair market value as
mutually agreed or per appraisal
6.2 In the event the county elects to purchase, tenant has first right to lease the
property and improvements if the county elects to relet the property
6.3 In the event the county does not elect to purchase, tenant
• May sell improvements to a party holding a new lease on the property as
granted by the county
• May be required to remove the improvements and restore the land
• May surrender the improvements to the county
6.4 In the event of lease termination due to tenant’s default, all improvements revert
to county
7. Assignment of Leases
7.1 With the county’s consent, all leases other than month-to-month are assignable
and tenant improvements may be sold subject to conditions
7.2 The proposed assignee/purchaser must meet all county requirements then existing
for a new tenant and assume the existing lease as tenant
7.3 Upon county approval of assignee, existing tenant is released from all further
obligations under the lease, not including any damages or lease violations
occurring during the existing tenant’s tenancy for which liability remains
7.4 Sub-tenancies and rentals are allowed so long as all lease terms are complied with
and the prime tenant remains fully liable under the lease, including for all actions
of sub-tenant or renter
8. Assignment of Lease to Secure Financial Obligation
8.1 With the county’s consent, the lease may be assigned to secure the tenant’s
construction or remodeling of county approved improvements, subject to
conditions
8.2 Only the tenant’s leasehold interest shall be encumbered and only one such
encumbrance shall be allowed to exist at any point in time
8.3 The encumbrance shall specifically be subordinate to all interests of the county
which shall have no financial obligations to the lienholder
8.4 The lienholder shall maintain direct contact with the county and provide the
county with copies of all notices or documents of tenant’s default on the loan
8.5 Lienholder must accept all lease terms and confirm that the loan terms do not
conflict with the lease
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8.6 The term of the encumbrance must end and all lien releases provided not less than
six months prior to the lease termination date
8.7 If the tenant defaults on the encumbrance and the lienholder has complied with all
its obligations to the county and timely cured all tenant defaults, the lienholder
shall have twelve months from the date of tenant’s default to provide a substitute
tenant that meets the requirements for an assignee of the lease per Section 7 above
8.8 Failing a timely substitute assignee/tenant, the lease shall terminate and all
improvements pass to the county free of encumbrances, and the lienholder’s
encumbering documents shall so provide
9. Use Restrictions – Air Side
9.1 The primary use of the leased property and improvements shall be for aviation
related activities
9.2 General storage of non-aviation related property is not allowed
9.3 Only specifically allowed activities and property may take place or exist outside
of fully enclosed structures
9.4 All commercial activities must be specifically approved by the county either in
the lease or separately
10. Maintenance of the Leased Property and Improvements – Ground Leases Only
10.1 All maintenance shall be at tenant’s expense and conform to county requirements
for appearance, safety and function
10.2 All structural components and fixtures shall be maintained, repaired and
reconstructed so that their functional and economic useful life reasonably extends
to the end of the lease term, including all extensions and including such items as
structural components, roof, exterior of structures, slabs and paving, plumbing,
heating and electrical
11. Parties to the Lease
11.1 All parties named in the lease as tenant shall execute the lease, including
husbands and wives
11.2 All entities named as tenant shall have the lease executed by authorized or
required persons as established by appropriate documentation; provided that all
partnerships shall be executed by all general partners
11.3 Any guarantors shall execute a separate lease guaranty which shall be an exhibit
to the lease
11.4 Lease guaranties will be general in nature but may be limited if agreed to by the
county
12. General Lease Provisions – these would include insurance, indemnity, hazardous
material, damage and destruction, default, termination and other such provisions normally
contained in a commercial lease and together with all special governmental agency requirements,
none of which normally contain issues of policy and are, therefore, no dealt with herein
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Recommended Lease Format
The prime lease document should contain information and terms generally applicable to most
airport lease situations
Exhibits to the prime lease will include, where appropriate:
• Exhibit A – Description of the premises
• Exhibit B – Description of the approved aircraft
• Exhibit C – Rent Schedule
• Exhibit D – Lease Commencement Date and Required Lessee Improvements
• Exhibit E – General construction requirements
• Exhibit F – Insurance requirements
• Exhibit G – Guaranty of lease