Q&A: Runway legal/tax issues

Question: The runway in our fly-in community isn’t a separate legal entity or tax parcel. The lots on either side of the runway go to the center of the runway and each lot owner’s deed provides an easement across their private property for the runway. This means there’s no separate tax for the runway itself since each property owner pays their tax bill which includes an equal share of the runway.

Recently we’ve been looking into obtaining liability insurance for our airpark and the question has come up about how we insure this. Is this a common practice? Have others had problems with this format? Can insurance be obtained for the runway only to be paid for by the various property owners?

Answer: Let’s tackle the easy part of the question first. There are a number of airparks around the country that operate in a similar manner. I’m not a fan of this approach at all. I would much rather short plat the individual lots and create a separate parcel for the runway, setting it up in a corporation or LLC.

Given my preference, that’s not always possible if the development is already in operation, lots have been sold and deeds filed. This is something you need a real estate attorney and good insurance agent to provide you with expert advice. In my opinion, the earlier you resolve this issue the better off you will be on that inevitable day when there’s an accident of some type and liability issues pop up.

As for obtaining liability insurance on just the runway, you’ve got to visit with a qualified insurance company. I see piles and piles of problems, however.
Some airpark developments have adopted this easement approach because it allows each lot to be larger and that might be required because of various regulations limiting the size of individual lots in a particular plat.

I’ve spoken with some people who feel this makes everyone be more aware and cautious about the runway because they are so intimately involved as a direct owner. I don’t buy that approach personally.

Most folks opt for this approach thinking they will save on property taxes. If you have a separate tax parcel for the runway property and a tax assessor sets the rate for that piece and then also hits the individuals for their property, the theory goes that the property owners are paying double or at least more then if the runway wasn’t separated out. I don’t personally buy that one either.

Let’s take a worst-case scenario: the property owner with an easment right near the middle of the runway fails to pay his taxes or doesn’t have insurance or he falls behind on mortgage payments and the property ends up in the hands of a non-aviation enthusiast. Even with your CC&Rs defining the easement and the runway uses, etc., you can still end up in a messy lawsuit or even having to step up and buy the property to protect yourselves.

Not good options!

I like to follow the KIS theory – keep it simple. Each property owner is separate and the runway (and any related taxiways) is another parcel. Taxes and insurance are then paid equally by all fly-in community property owners.

Does your airpark have issues that you’d like me to address? E-mail your question to me. Be sure to include your phone number in case I need clarification on your question.