Fractional Ownership: Sometimes, ‘Fair Market Value’ Isn’t So Fair

In my debut contribution to Business Jet Traveler's "Inside Fractionals" column, I offered some advice to fractional jet owners looking to exit their contracts.

That advice is even more relevant now, at a time when the fractional jet industry has been rocked by the economic downturn. With fractional flying down, and some fractional companies apparently in distress, many fractional owners want out. Desperate for cash, providers are making it as difficult as possible for owners to exit their contracts, often delaying repurchases or offering valuations so low, it almost doesn’t make sense to sell. Owners wonder if their shares have gone down in value as the providers claim, in some cases as much as 70%. What owners may not know is that they have the right to contest these valuations through the appraisal process provided in their Purchase Agreements. Owners, who appreciate that they have this right, often don't have the market knowledge and other expertise necessary to exercise it successfully.

When is it worth it to contest your provider's low ball valuation? The larger the share and the bigger the aircraft, the more likely it is that it will be worth your while. Bringing to bear a unique blend of legal and aviation expertise, we've fought for and obtained significantly higher fractional share valuations for many owners.

You can put yourself in the best position by anticipating this contest and negotiating changes in the standard boilerplate Purchase Agreement with regard to how the process will work and, most importantly, how the value of your share will be determined.

Read the full article, “Sometimes, ‘Fair Market Value’ Isn’t So Fair” here.