You are purchasing your first aircraft, a pre-owned aircraft. You trust the seller, but know from prior business dealings that performing your own due diligence on an asset you are purchasing can save future headaches.
Check the FAA Records and the International Registry Records
First you should check the records of the United States Federal Aviation Administration (FAA) to determine whether the party listed as the seller in your purchase agreement is shown as the registered owner by the FAA. You also want to check the FAA and International Registry (IR) (also known as Cape Town Registry) records for the airframe and each engine. The FAA and IR searches will provide information about the current registered owner and any liens filed with the FAA or the IR. The escrow agent you are using for your purchase transaction can assist with the FAA and IR searches.
Federal Tax Liens, State Tax Liens, UCC filings and Judgments
A search of only the FAA and IR records will not uncover all liens that could affect title to the aircraft you are purchasing. Federal tax liens are not required to be filed with the FAA to be perfected. While state tax liens should be filed with the FAA, a State may still assert a lien against an aircraft even when the State has not filed its lien with the FAA. Since not all liens are filed with the FAA or the IR, Uniform Commercial Code (UCC), tax lien and judgment lien searches on the current owner of the aircraft are generally prudent to perform thorough due diligence on the title of the aircraft. It can be helpful to find out where the aircraft has been hangared during the last five years and also any other locations where the aircraft has spent a significant of time, such as a satellite office or a vacation home. You may want to perform certain searches in those locations as well as the jurisdiction where the seller was formed and the seller’s primary place of business. Most aviation escrow agents do not perform UCC, judgment lien or tax lien searches so you can work with your aviation counsel or another vendor to obtain this type of search. Title insurance is available for aircraft purchases and can help protect a purchaser against prior title problems.
Although this article only addresses title issues, in addition to due diligence on the title a purchaser should work with its technical advisor and have a thorough pre-purchase inspection performed by a qualified facility.
Michelle M. Wade is a Partner with the aviation law firm of Jetstream Aviation Law, P.A. and counsel clients on the acquisition, financing and operation of corporate jets operated under Part 91 and Part 135 of the US Federal Aviation Regulations. Jetstream Aviation Law can be found at www.JetstreamLaw.com. Michelle Wade (firstname.lastname@example.org)