In all of the time that I’ve been working on aircraft transactions, a few have fallen through because of economic conditions: the stock market fell, the price of oil plummeted, a company hit hard times. Several deals have been aborted for undisclosed damage history. But more often than not, aircraft transactions get squirrely because attorneys are paid by the hour.
In fact, last year I attended a conference in Miami of aviation professionals, attorney and bankers. I choked on my coconut water as I saw the title of one presentation: “How to Make Your Legal Fees as High as Possible.” The presenter was an attorney. No surprise there.
In short, attorneys make more money if your deal is more complicated. And I’ve seen a good number of attorneys make deals more complicated than they need to be. Now, in their defense, I haven’t litigated any aircraft deals, so I don’t know all the pitfalls. But, I’ve seen powerful organizations draft a rock-solid, three-page contract and others send a purchase agreement draft that’s 60 pages with all the definitions and exhibits.
I’ve been a part of transactions that drag on for weeks with tens of thousands of dollars in legal fees on both sides, and I’ve drafted an agreement from Charlie Bravo’s template that received very few redlines from aviation or in-house counsel. Before you spend thousands of dollars unnecessarily, you might ask any potential counsel some pointed questions. Here are three of my favorites:
Have you worked on this size [or this complexity type] aviation transaction before?
If it’s going to be a complex transaction, you want someone who has already been paid by another client to figure out the complexities involved. Specialization may cost more per hour, but it should take fewer hours. Yours and theirs.
How much should I expect legal fees to be for this particular transaction?
My friend Jim Struble, of Jackson Walker in Dallas, is a pilot and aviation attorney with 30+ years of experience. Jim indicates $5,000 to $10,000 is an appropriate amount for an aviation attorney to charge for a normal transaction. However, lots of things can complicate a deal legally, so planning ahead and understanding the transaction is important.
How are you going to support me after the transaction?
Will your aviation attorney help with your financial reporting? Will he or she support you in your taxation litigation? The aircraft purchase itself is only the tip of the iceberg. You’ll want to know what level of support your aviation attorney will provide once the transaction has been completed.
Some attorneys, like those at Advocate Tax, charge an annual fee per aircraft and provide any documentation, tax preparation or legal defense necessary concerning that aircraft. Amazingly, the dozen or so times I’ve worked with them, efficiency has ruled.
There are plenty of other things that can cost you time and money unnecessarily in aircraft ownership, but outrageous legal fees seem to be near the top of the list. Join us for a free webinar “How to Save Six Figures on Your Next Aircraft” to learn more. Register by clicking here.