Locked-in Hollister Airport Operator Lacks Required (Real Estate) License – The fixed-base operator for the Hollister Municipal Airport – which has collected hangar rents there for more than 10 years – does not maintain a real estate broker’s license as California law requires. That business, Gavilan Aviation, recently agreed to a long-term extension with the city as the airport FBO, and will receive nearly $200,000 over the next decade just to collect those rents and do annual surveys.
An online search of state records found that Gavilan Aviation, Inc., its parent company and owners had not been listed as having a California real estate broker’s license. The business also is not listed as a professional service company on its city business license.
The owner of Gavilan Aviation, unaffiliated with Gavilan College, confirmed the business did not have a real estate broker’s license. He said in a phone interview it was the first time he had heard of the requirement and also stressed he does not recruit new tenants.
“I don’t broker tenants,” said Gavilan Aviation owner David Leonardo. “I’m not a broker.”
Even still, the state law is clear in requiring a license if a third party such as Gavilan Aviation collects rents.
The section of the business code, 10131(b), notes that real estate broker services require a license and it goes on to define a real estate broker as the following:
“Leases or rents or offers to lease or rent, or places for rent, or solicits listings of places for rent, or solicits for prospective tenants, or negotiates the sale, purchase or exchanges of leases on real property, or on a business opportunity, or collects rents from real property, or improvements thereon, or from business opportunities.”
For 10 years, though, the city has been paying Gavilan that same 20 percent of collected rents – nearly three times the going rate in the region – to manage 24 airport-leased properties while merely collecting the fees, keeping rent records and doing annual rent surveys. A lack of involvement in luring prospective renters, meanwhile, runs contrary to recent city staff reports underscoring how part of the 20 percent fee involves Gavilan finding tenants.
In November, the Hollister City Council accepted a proposal from Gavilan Aviation to add a recently vacated airport hangar to the business management agreement “in return for marketing and leasing.” Marketing, leasing or collecting rent from real properties for compensation on behalf of another party requires a real estate broker’s license, according to the state code.
According to the November city staff report, Gavilan Aviation “currently had tenants looking for space and [were] available for immediate occupation” of the hangar.
But those tenants never materialized. Instead, a company wanting to lease the property approached the city directly.
The city recently leased the hangar – the one used for 50 years by the community college, which vacated the site last year – for two years at $3,800 a month to Aris Helicopters. Gavilan Aviation is being allocated 20 percent of the rent, or $760 a month, although it did not furnish the tenant and cannot legally manage the property.
The standard fee for commercial property management in this area from a licensed broker is 6 percent to 8 percent, according to a survey of major commercial real estate brokers in the region, which would be $304 a month at most compared with the $760 figure.
Commercial property management also routinely entails a longer list of responsibilities, such as paying insurance premiums and handling routine maintenance problems, but such duties are not included in the city’s arrangement with Gavilan Aviation. The city is responsible for most of the management functions and all the expenses.
In a separate agreement, Gavilan also collects tie-down and fuel flow fees on the city’s behalf. For operating the tiedown service, Gavilan keeps 70 percent of the gross receipts and the city gets 30 percent. The operator has the right to tie down a maximum of seven of its own aircraft without payment.
In response to a Free Lance public records request, the city produced information on airport leases but did not provide any audit results of Gavilan from the past decade, as requested.
The right to manage the 24 T-hangar leases will expire in December 2020. The flowage and tiedown fee arrangements also have been in effect for more than 10 years and would have had another 10 years to run until recently extended. The previous agreement had locked the city into a maximum 5-cent a gallon fuel flow fee until 2021.
In January of 2011, in exchange for the right to increase the fuel flow fees annually, the city gave Gavilan the option of extending the term of its agreement for two additional five-year options, until December 2030, a total duration of 30 years.
The result is that the airport users could be paying for Gavilan’s 10-year lease extension in higher fuel taxes, and the council Monday will consider increasing the fuel flow tax from 5 cents to 12 cents per gallon.
Over the next 10 years at current rates – which are inflation protected – the T-hangar rent commissions would bring Gavilan about $179,000 and the new management fee for the two-year lease would bring in an added $18,240.
Editor Kollin Kosmicki contributed to this report.
CALIFORNIA BUSINESS AND PROFESSIONS CODE
Section 10130
It is unlawful for any person to engage in the business, act in the capacity of, advertise or assume to act as a real estate broker or a real estate salesman within this state without first obtaining a real estate license from the department.
Section 10131
A real estate broker within the meaning of this part is a person who, for a compensation or in expectation of a compensation, regardless of the form or time of payment, does or negotiates to do one or more of the following acts for another or others:
(b) Leases or rents or offers to lease or rent, or places for rent, or solicits listings of places for rent, or solicits for prospective tenants, or negotiates the sale, purchase or exchanges of leases on real property, or on a business opportunity, or collects rents from real property, or improvements thereon, or from business opportunities.
To read the sections of the state code, go here.
Marty Richman • is an occasional correspondent for the Free Lance.
