What You Need to Know About Preowned Fractional Shares
James Butler Advises Owners to Pay Attention to the Fine Print
A key factor in the overall cost of a fractional jet investment is the payback you get when you resell your share to the jet company. Fractional owners often are shocked to find that the “fair market value” offered by the jet company is significantly less than what they initially paid—sometimes as much as 70% less.
On some occasions, owners can get a higher price by selling their shares directly to another buyer. This secondary market sale can prove beneficial to the buyer as well, who can purchase the pre-owned share at a lower price than they'd pay a provider.
In an interview with Business Jet Traveler, private aviation attorney and consultant James Butler offers insight into the challenges of secondary fractional markets. Fractional providers bury nonassignment clauses, fees and restrictions in their contracts that severely restrict resale rights, effectively boxing out secondary market sales. Unfortunately, as Butler points out, “these provisions often are overlooked by unsuspecting fractional owners.”
Shaircraft hears from fractional owners every week who wish they'd paid more attention to how their fractional share's repurchase value would be determined and how they'd liquidate their interest at the end of their contract. The best way to avoid costly and irreversible mistakes when it comes to fractional deals – whether you're buying or selling in the primary or secondary markets – is to have an attorney who specializes in private aviation deals review and negotiate your contract before you sign.
Discussing secondary market sales, Butler advises, “Be clear what it is you're getting—and not getting. Determine the contract is in good standing and fully paid up, and there are no hidden liabilities that you'll be assuming. Know that, by design, the fractional company is looking to make any such transaction difficult and inconvenient.”
Learn more about about how Shaicraft helps fractional jet owners get the most out of their investment here.