By Garrett Watson, Lead Planner/Aviation Business Specialist, Centurion Planning &
Design
Airports are not just runways and control towers. They are also complex real estate operations, and the land lease is one of the most important tools in ensuring airports remain financially sustainable while also attractive to private investment. A poorly written lease can create decades of headaches. A well-crafted one, on the other hand, ensures an airport keeps control of its property, meets Federal Aviation Administration (FAA) requirements, and sets up both the Airport Sponsor and the tenant for long-term success. The FAA has long insisted that sponsors remain in control of their land, and historically it viewed the reversion clause—where tenant-built improvements revert back to the airport at the end of a lease—as the gold standard. But times are changing, and so is FAA’s posture. While still supportive of reversion, the FAA is now open to airports exploring other solutions, as long as the end result keeps the airport compliant and adequately compensated.
So what exactly is a reversion clause, and why does it matter? Traditionally, reversion means that if a tenant builds a hangar on leased airport land, ownership of that hangar transfers to the airport at the end of the lease term. In other words, once the tenant has amortized their investment over the term of the land lease, factoring in depreciation paired with low unimproved land lease rates, the improvements on said land become property of the airport. This approach gives the airport a fresh opportunity to plan for land use, capture new rent revenue, and avoid a situation where private ownership ties its hands. However, this also comes with difficulties. Airports often inherit buildings that are functionally obsolete or in need of major repairs, creating costly maintenance liabilities difficult for smaller General Aviation (GA) airports to shoulder. Reversion has also become a source of tenant frustration, with many lessees feeling like their investment could simply vanish into thin air when their lease ends.
Recognizing this, the FAA has made it clear that reversion is not mandatory. The real concern is compliance with the rules that matter most: preserving sponsor control, ensuring economic nondiscrimination, and keeping the airport as self-sustaining as possible. If these goals can be met without reversion, the FAA is satisfied. That flexibility is encouraging airports around the country to experiment with alternatives that still protect the public interest.
One alternative is the removal-and-restore model, where the tenant removes its improvements and returns the parcel to bare land at the end of the lease. This works when a building no longer has useful life or does not fit with the airport’s Master Plan, a document the airport generally updates every seven to ten years providing direction for the future in terms of development and funding. Another option is for the airport to purchase the improvements at fair market value, compensating the tenant fairly while adding an income-producing asset to the sponsor’s portfolio. Some airports have taken the approach of offering lease renewals that allow tenants to retain ownership of improvements but pay a higher “improved ground” rent, reflecting the enhanced value of the property. Others have created a Reversion Deferral Fee program, where tenants can opt to defer reversion by paying a per-square-foot fee for a set period in line with what the airport could make if they owned the hangar and rented it out. This arrangement gives the airport steady revenue while the tenant is allowed to retain the use and ownership of their facilities longer.
Case studies are beginning to emerge that illustrate these creative approaches. In Pendleton, Oregon, the airport’s policy gives tenants the choice between a traditional reversion pathway or a tenant improvement compensation model, where higher ground rates are charged from day one, but tenants have more flexibility to continue leasing under a new agreement before final reversion occurs. In Joplin Missouri, the airport created a justification for non-reversionary land lease rates, carefully tying them to market benchmarks to satisfy the FAA’s “self-sustaining” standard. Rapid City, South Dakota, and Dallas Executive Airport in Texas both distinguish between improved and unimproved ground in their rate schedules, acknowledging that when tenants retain ownership of buildings, the underlying land justifiably commands a higher rent and the costs of maintaining the structures remain the responsibility of the tenant, which saves the airport money. Ontario Municipal in Oregon even spells out in its lease template what happens in different scenarios, including purchase-at-FMV, demolition, and holdover provisions. These examples show that there is no single way to structure an end-of-term arrangement, and that airports can adapt based on local market realities, master planning needs, and tenant investment cycles.
For airport managers, the lesson is that leases must be drafted with the end in mind. Every agreement should clearly define what happens when the clock runs out. Whether the solution is reversion, removal, renewal with improved ground rent or additional investment, or a deferral fee program, ambiguity is the enemy. Beyond that, airports should consider their own philosophy of whether they want, or are able, to bear the responsibility and expense of upkeep and maintenance on a given hangar in relation to what they stand to gain through ownership. Rental rates should reflect these expenses.
Additional lease considerations include strong provisions around term lengths that reflect the scale of the investment, rental structures that keep pace with inflation as well as market conditions, appraisal and fair market value standards that avoid disputes, and clear obligations for maintenance and compliance. Airports also need to build in remedies for defaults, short but decisive holdover language, and ensure that financing provisions such as lender step-in rights do not compromise sponsor control. Think of it as building a hangar of clauses: every truss and rivet matters.
On the other side of the table, prospective lessees and tenants need to read closely before signing. Understanding reversion language is critical, but so too is knowing whether there are options to extend the lease, defer reversion, or negotiate an improved ground rate arrangement. Tenants should be clear on what condition their buildings must be returned in, how rate resets will occur over time, and what exit strategies exist if they want to transfer or sell. Holdover provisions, approval timelines, insurance obligations, and even environmental compliance should all be on the radar. For lessees, the goal is to avoid being surprised by hidden costs or restrictive clauses that limit flexibility.
At the end of the day, airport leases are not just legal instruments; they are partnerships that last decades and shape the financial health of both sponsor and tenant. The FAA no longer insists on a one-size-fits-all solution, but it does expect airports to maintain control and operate on sound financial footing. That opens the door to creativity, as long as the fundamentals are respected. For airports, that means drafting leases that are clear, fair, and on solid legal footing (aka, enforceable). For tenants, it means knowing exactly what they are signing up for, from the first shovel of dirt to the final day of occupancy. If both sides approach the deal with eyes wide open—and maybe a little empathy along the way—then everyone can keep the action on the runway and out of the courtroom.
Certainly, there is a plethora of additional details that can be explored in lease writing, building on what I’ve touched on. That said, if you are either an airport manager, local government leader, stakeholder, or potential airport tenant reading this, and find yourself writing down a list of questions you would like to know more about, please feel free to reach out to me at garrett@plan.design. I will happily dive into greater detail to ensure you have a good foundation to work with when it comes to structuring or understanding airport leases. If you are interested in exploring the possibility of restructuring or updating your leases at your airport, we can help with that, too. Lastly, I am not an attorney and must add that nothing stated here is intended to be construed as legal advice.
