As we get to the end of the year, many aircraft purchasers and sellers are trying to get their deals closed. Whether for tax or other reasons, year end is a busy time for aircraft transactions. Many transactions are closed using escrow agents located in Oklahoma City, Oklahoma (home of the FAA Aircraft Registry). If you have never been involved in an aircraft transaction, you may wonder what happens at an aircraft closing.
In a typical (if such a thing exists) aircraft closing, here are the steps an escrow agent takes to help aircraft sellers and purchasers close a transaction once all of the necessary funds and documents are in escrow:
The escrow agent will pay off any liens, mortgages, security interests or other interests held by third parties against the aircraft ("Liens");
The escrow agent will disburse to the seller the purchase price, plus any unpaid amounts due from purchaser to seller for flight costs associated with moving the aircraft to the inspection facility or the delivery location, and less one-half of the escrow agent's fee;
Once the seller confirms receipt of the funds, the escrow agent (a) dates and files with the FAA releases of any Liens the FAA Aircraft Bill of Sale (FAA Form 8050-2), the Aircraft Registration Application (FAA Form 8050-1) and statement in support (for example, if the purchaser is a limited liability company); and (b) dates and releases the Warranty Bill of Sale and Assignment of Warranties and Other Rights (if applicable) out of escrow to purchaser;
Purchaser executes and delivers the delivery receipt to the seller which confirms the aircraft is in the delivery condition and is accepted by the purchaser;
If the aircraft is subject to the Capetown Convention, the escrow agent, as purchaser’s professional user entity, registers the sale of the aircraft to the purchaser with the International Registry; and
The escrow agent, as the seller’s professional user entity, discharges any registration by seller with the International Registry of any international interest or prospective international interest registered with respect to the aircraft, and consents to the registration of the sale of the aircraft to the purchaser.
The seller and purchaser usually intend that each of these actions is interdependent with each of the others, but that upon completion they are considered to have occurred simultaneously. When all of these steps are completed, the seller delivers physical possession of the aircraft to the purchaser at the closing location.
This closing process may occur via a telephone call with all of the interested parties on the line, or simply after each of the interested parties has provided authorization (usually via e-mail) for the escrow agent to perform these steps and close the transaction. And, of course, depending upon the transaction, these steps may vary. But this is generally how the process occurs.
If you ever have questions or need assistance with an aircraft transaction or closing, I would be happy to help. And in the meantime, Happy New Year.
Greg can be reached at:
Shackelford, Bowen, McKinley & Norton, LLP
9201 N. Central Expressway, 4th Floor, Dallas, Texas 75231
Direct: (214) 780-1482 - Fax: (214) 780-1401
As an inventorying-dealer, we are often asked by aircraft owners “Does it pay to make a move now?
The truth is, whenever you buy or sell an asset, there are unavoidable costs associated. Selling a home can be one of the best examples of an expensive transaction with often little monetary value gain. Moving costs, furniture damage, endless time spent cleaning/showing the home, agent commissions often eat up your anticipated fortune.
An aircraft transaction however, has an overwhelming amount of justified reasons to invest. Whether for business or for personal use, aircraft as we all know are time machines which can also bring value to an owner’s employees, their families, the employee morale at a distant store or a face-to-face meeting with a vendor about an issue. I would even argue the efficiencies a properly advised owner can create during a transaction can make for large gains in monetary value at times. No, I’m not suggesting you go buy a Falcon 10 and wait for the market to rise, however there ARE opportunities in this current active market, to make smart financial gains in your aviation transaction both for the short-term & long.
Whether it means you are a new private pilot moving up from your first 172 to a faster Cirrus, or whether you are a large corporation looking to sell your Citation XL and get into a large-cabin Falcon, I believe this is a good time to move! With pre-owned aircraft inventories shrinking daily & firming prices, we are already at pre-2008 inventory levels again and first-time buyers are entering the market which we haven’t seen in a decade. Only a couple years ago, we would commonly advise clients the selling would be the tough part, but the buying is easy. Now that is almost opposite in some late-model jet markets where buyers are waiting patiently for months at asking price while the seller tries to locate their new aircraft.
What should you do? Get the advice of a trusted and seasoned professional. If you aren’t already working with a broker or dealer, I recommend starting your search for one at National Aircraft Resale Association From there you’ll have the freedom to rely on your broker’s market intel, along with your good business sense which likely allowed for you to buy an aircraft in the first place. Good hunting and God Bless.
Chris is the Vice President of Meisner Aircraft who has served companies both small and large for over 30 years. They have built their reputation of providing good sound business advice for clients around the world. Whether it was a customer purchasing their first single engine aircraft or the larger flight department who needed a company with the experience and expertise to handle a complicated transaction process. Family owned and operated they have successfully been involved in over $900 million in aircraft sales.