When you buy or sell an aircraft it is important to know with whom you are dealing. If your aircraft transaction is part of a flip (also known as a “back to back”) you do not always know the other parties in the transaction chain.
What is a Flip?
A flip involves the “Owner” entering into a contract to sell the aircraft to the “Intermediary” and the Intermediary simultaneously entering into a contract to sell the aircraft to the “Buyer”.
Why Flip?
Some flip transactions are transparent and done with the knowledge and agreement of all parties. It may be done to make a US buyer comfortable that the intermediary has already imported and registered an aircraft that was previously foreign-registered. A flip may be the preferred method for a broker to receive its commission. Beware of a flip due to a party insisting upon confidentiality. Lenders, export control laws and anti-money laundering laws, among others, all require you to obtain information about the parties to your transactions.
Tips Its a Flip
- Is the aircraft registered in a different name than the name on your purchase agreement? Ask why your contract is not with the registered owner.
- Is it taking a long time to negotiate the contract and the comments you receive do not reflect your conversations with the other party to your contract?
Considerations
- Is the Intermediary the “broker” for both parties and for itself?
- Is the Intermediary using Buyer’s deposit to become the deposit for the contract between the Intermediary and Owner?
- Can the Buyer send independent representatives to the pre-buy inspection and on any test flight?
- Will the Buyer receive a copy of the inspection report directly from the inspection facility?
- What is the timing of the release of funds and the bill of sale?
- Does your fly-away sales tax exemption apply to the facts of your flip?
Please contact Jetstream Aviation Law if we can assist you with addressing your aviation issues.
Michelle M. Wade is a partner with the law firm of Jetstream Aviation Law and counsels clients on the acquisition, financing and operation of corporate jets operated under Part 91 and Part 135 of the Federal Aviation Regulations. Jetstream Aviation Law can be found at www.JetstreamLaw.com.
The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.
