Buying or selling an aircraft can create a legal nightmare for business owners who don’t anticipate the kinds of problems that can arise. You don’t want to wait until a dispute arises about the condition or history of an aircraft, or when damage to an aircraft occurs that may or may not be covered by insurance. That is why it’s important that you retain legal representation from an experienced aviation attorney.
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Buying and Selling an Aircraft
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If you are contemplating purchasing, selling, or leasing a business aircraft or private jet, you want to do it right. Planning ahead for a purchase can prevent costly and unpleasant surprises down the road. Advance planning can provide you with certainty that you will be able to use your aircraft to maximum benefit, and at the same time comply with proper ownership and operational requirements.
You should also plan ahead for a sale to ensure a smooth selling process and avoid being jilted by your buyer.
An experienced aviation attorney can guide you through the process and complete all necessary steps as quickly and efficiently as possible.
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Buying or selling an aircraft can, at times, be a lengthy and complicated process. An experienced aviation attorney can guide you through the process and complete all necessary steps as quickly and efficiently as possible.
Every aircraft purchase and sale is unique, and a personalized consultation and preparation of your documents helps avoid problems with this high-value purchase. Without the assistance of an experienced attorney, the risk of missing an important step is high, and the financial, legal, and tax consequences can be significant.
Buying/Selling FAQs
What should be included in broker agreements
What did you agree to pay your broker? When do you pay your broker? How long is your exclusive listing with your broker to market your aircraft? We recommend putting your agreement in writing.
How to choose a closing location
Closing location is an important term in a purchase and sale agreement. It has a significant impact on state taxes you might owe. Know the implications before you agree to a closing location.
What due diligence should you review in connection with your aircraft purchase?
In addition to the FAA Aircraft Registry reports and International Registry reports received from the escrow agent, an aircraft buyer should consider obtaining UCC, tax and judgment searches. While federal law in general requires aircraft liens to be filed with the FAA, there are some notable exceptions. Federal tax liens are exempted from the Transportation Code, and are not required to be filed with the FAA to be perfected. These liens are generally aimed at the company, but could encumber the title to any aircraft owned by the company. While State tax liens do not have a specific exemption from the Transportation Code, many states have taken the position that they do not need to comply with the Transportation Code, and therefore have asserted liens against aircraft and/or engines even when they have not filed liens with the FAA.
Should you buy title insurance?
Are you buying a repossessed aircraft, an aircraft out of bankruptcy, or one which has had many owners? If so, you may want to consider title insurance. Previously title insurance for aircraft did not offer much protection, but newer title policies now cover the risk that you may not own legal title to the aircraft, and they offer protection from claims on matters that have been filed with the FAA, and for a certain level of federal and state tax liens. Additional state and federal tax lien coverage may also be available for purchase.
What is the “IR report” telling me?
The International Registry (“IR”) report on the airframe and engines is part of the title search you want to receive from the escrow agent. It shows all registrations that have been made against the specific serial number airframe and engines of the aircraft that was searched. This includes sales, financing, leasing, assignments of leases, discharges of financing, and termination of leases. These filings should generally follow the chain of ownership and financing reflected in the FAA records, with each filing except the current ownership and financing having been released. However, some buyers opt not to register their purchase on the IR, so some of the history may be missing. If your airframe has a long history, or was owned in a fractional program, it will have a long IR report.
What financing is available for a business aircraft?
We can assist with reviewing the aircraft security agreement received from your lender as well as any operating leases and financing leases involved in financing your business aircraft.
What to include in Letters of Intent and Offers to Purchase
Your letter of intent should include all of the terms that are most important to you. You do not want to wait until the very last open issue in your purchase agreement to discover that you and the other party will never reach agreement on a critical point.
What to include in Purchase Agreements and Sales Agreements
A purchase agreement prepared by your aviation counsel can help avoid some common problems. Some of the significant issues the purchase and sale agreement should address include (i) the scope of the pre-purchase inspection; (ii) what discrepancies the seller must pay to repair; (iii) the condition the aircraft is to be in at delivery time; (iv) when the deposit becomes nonrefundable; (v) whether the buyer has a right to reject the aircraft after the pre-purchase inspection; and (vi) whether the seller can decide not to repair any discrepancies and terminate the agreement.
