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Aircraft Registration Alert:
FAA issues new rules regarding United States aircraft registrations.

On July 20- 2010- the FAA issued a new set of rules regarding the Re-Registration and Renewal of Aircraft Registration (the ‘New Rules’). The New Rules are effective as of October 1- 2010. According to the FAA- the revised registration requirements set forth in the New Rules are being implemented to improve the accuracy of the FAA’s aircraft registration database.

The New Rules implement profound changes to existing law. Thus- aircraft owners need to understand the requirements of the New Rules to ensure that their aircraft registration remains valid. Currently- a U.S. aircraft registration has no expiration date. It remains valid until the aircraft is deregistered by the current owner or is sold to a new owner that registers it. The FAA estimates that approximately one-third of the 357-000 currently filed aircraft registrations are flawed. The FAA has therefore determined that it is necessary to implement a system for the re-registration of all aircraft registrations in existence prior to October 1- 2010 and for the periodic renewal of all Certificates of Registration of aircraft issued on (or after) October 1- 2010.

Each aircraft registered in the United States prior to October 1- 2010 has been- or will be assigned a date on which its currently effective Certificate will expire based on the month in which the FAA issued the Certificate. The re-registration of these Certificates will occur over a three year period based on the month in which the FAA issued the Certificate (see table right).

Beginning on October 1- 2010- all newly issued Certificates (including those issued pursuant to the re-registration rules) will expire on the last day of the month of the third year following the date the FAA issued the Certificate. If an aircraft registration in existence prior to October 1- 2010 is not re-registered- or if a Certificate issued on or after October 1- 2010 is not renewed by the expiration date set forth therein- the aircraft may not be operated until the FAA issues a new Certificate pursuant to a newly filed Aircraft Registration Application.

The FAA will require aircraft owners with Certificates issued prior to October 1- 2010 to use a new form referred to as an ‘Application for Aircraft Re-registration- AC Form 8050-1A.’ For Certificates issued on- or after October 1- 2010- the FAA will require registered owners to use another form- an ‘Application for Aircraft Registration Renewal- AC Form 8050-1B-’ in connection with the renewal of the Certificate. The FAA will continue to use the existing ‘Application for Aircraft Registration- AC Form 8050-1’ for new registration applications that are filed when an aircraft is bought or sold.

Provided no information contained in a current registration has changed and needs to be updated- the New Rules permit online processing of Certificate re-registrations and renewals. The FAA will provide a separate website for such purpose. The New Rules state that the FAA will provide current owners with two notices of the requirement for re-registration and renewal of an aircraft registration.

The FAA will send the registered owner a first notice approximately 180 days before the registration expiration date. If a registered owner has not applied for re-registration/renewal within the period required for such application described above- the FAA will send the registered owner a second notice- which it will send approximately two months before the Certificate expiration date. Finally- the FAA will send a third notice following the Certificate expiration date stating that the registered aircraft may not be operated until it is re-registered.

CONSEQUENCES FOR FAILURE TO RE-REGISTER
U.S. registered aircraft owners must understand that the failure to re-register/renew a Certificate could result in several negative consequences. The failure to file for re-registration or renewal of registration within the time period set forth in the first notice from the FAA could result in a delay in processing such application or- in a worst-case scenario- in the cancellation of the registration and the potential loss of the aircraft’s tail or “N” number.

In most- if not all instances where an aircraft is financed or leased- the loan or lease documents require the aircraft to be properly registered at all times. The failure to maintain a valid Certificate would likely constitute an event of default under the applicable loan or lease documents. Furthermore- the expiration of a Certificate could result in negative insurance coverage issues if the relevant insurance policy requires that the aircraft be validly registered at all times while the policy is in effect.

It is imperative that all owners of U.S. registered aircraft ensure that they are aware of the requirements of the New Rules. Such owners should also verify that the address on file with the FAA and set forth on their current Certificate is valid so that they receive the FAA notices of re-registration and renewal requirements and file the correct form in time so that their current registration remains effective and does not expire.

Please keep in mind that this article serves as a general and broad overview of the New Rules and does not constitute legal advice or a legal opinion. Therefore- it is always advisable to consult with qualified aviation counsel when considering any questions regarding the New Rules.

Christopher Younger is an attorney at the Law Offices of Christopher B. Younger- LLC. He is a tax and FAA specialist concentrating in the areas of corporate aircraft transactions and aviation taxation. He has extensive experience in planning and implementing unique aircraft ownership and operating structures on a global level. He has worked on numerous tax audits with the IRS and with various state taxing authorities. The firm’s services include Code Section 1031 tax-free exchanges- federal tax and regulatory planning- state sales and use tax planning- and preparation and negotiation of transactional documents commonly used in the business aviation industry- including aircraft purchase agreements- leases- joint-ownership and joint-use agreements- management and charter agreements- and fractional program documents.

Mr. Younger can be reached at the firm’s offices at 47 East All Saints Street- Frederick- Maryland 21701; telephone (301) 696 5735; email:
cbyounger@cbyoungerlaw.com


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