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For most individuals- a house stands as the biggest investment of their lifetime. Unlike most other transactions- in home buying- issues from the past hold the potential to cloud the validity of the title- and financial or past construction and repair bills may further complicate the transaction. For business aircraft owners- the decision to purchase a corporate airplane can easily involve an investment greater than the ...

Dave Higdon   |   1st August 2008
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Dave Higdon Dave Higdon

Dave Higdon writes about aviation from his base in Wichita Kansas. During three decades in...
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Wright Brothers Aircraft Title Delivers.

For most individuals- a house stands as the biggest investment of their lifetime. Unlike most other transactions- in home buying- issues from the past hold the potential to cloud the validity of the title- and financial or past construction and repair bills may further complicate the transaction.

For business aircraft owners- the decision to purchase a corporate airplane can easily involve an investment greater than the sum of the home – and maybe a second and third domicile.

The risks of such undiscovered territory most manifest themselves any time the aircraft involved comes from a source other than the OEM - i.e. pre-owned. Yet no potential buyer needs to solo navigate the complex cross currents of aircraft ownership- financial and operating histories and liens. Help is available from any number of title-service companies- among them the busy folks at Wright Brothers Aircraft Title.

Headquartered in Oklahoma City- Wright Brothers Aircraft Title employs a staff of six engaged in fleshing out the records identifying owners- accidents- mods and any potential issue capable of complicating the transfer of ownership – with all its implications for both the company’s finances and travel needs. And among its other services- Wright Brothers Aircraft Title (WBAT) also helps buyers and sellers expedite title and registration transfers as well as changes in registration. Closing and escrow services round out the company’s main activities.

WBAT works to quickly and accurately deliver its services by maintaining an office in the Federal Aviation Administration’s Mike Monroney Aeronautical Center – the repository of FAA’s aircraft- engine- prop and airmen records. In performing its services- WBAT brings to bear all the experience of a seasoned staff headed by company founder and owner- Debbie Mercer.

From the Real to the Aeronautical
Mercer started the company in the fall of 2001 after working two years at another Aircraft Title service. She applied for- and landed- that position unaware the company serves the aviation community rather than real estate buyers. Real estate was her background.

“It turned out that though there are some obvious differences- aircraft and real-estate title work have far more in common-” she explained. “The work was largely similar and picking up on the differences came pretty fast.”

The work appealed to her - she enjoyed the different dynamic of working with airplane people. And the aircraft title work synched with her latent interest in flying. Mercer started lessons years ago- but life intervened and she stopped training. Her brother also felt the appeal of aviation- borrowed Mercer’s training materials- and proceeded to become a licensed pilot. And she has in-laws who also fly. Flying- she noted- has long held a place in her heart and if work and family demands will allow- she wants to resume training – perhaps first earning a Sport Pilot certificate as a start and moving up from there.

With a steady pool of business clients – brokers and dealers numbering about 25 – and a healthy “walk-in” clientele- the abbreviated training required to become a sport pilot better fits against competing demands on her time.

And since Sport Pilot flying counts toward fulfilling the Private Pilot ticket and other ratings- the LSA route will help her advance with less training downstream. “If an airplane is in our future- I’ll have plenty of contacts to turn to.”

Mercer also will know the best drill for tending to the paperwork demands needed to assure a clean purchase – in minute detail. As a result- she’s among the least-likely of candidates to let her enthusiasm or zeal put at risk the integrity of the transaction. “I love the industry. I love the business-” she said- “but business is business.”

In a wide-ranging conversation with Mercer- she noted some of the common pitfalls buyers suffer when working without the safety net of a title service such as hers.

You Found The Candidate! What’s Next?
A buyer should start working with a title-search service “Right at the beginning-” she explained- when they’ve found a prospective buy. “When they’re ready to go ahead and the seller wants a refundable deposit before a pre-purchase- the buyer should first call someone like us.”

Seeking a title search before signing a purchase agreement can help catch problems with the potential to effect the aircraft’s value- if not the possibility of a legal change of hands outright. “We can do the same thing with the aircraft’s history and check for any mechanic’s liens at the same time- getting a complete picture of the airplane’s history so the buyer knows before going any farther-” Mercer explained.

Particularly alarming- some such problems can surface on an airplane even after it cleared a prior title and lien search- Mercer noted. She- brokers and finance specialists noted that not all buyers opt for all services – sometimes to their regret. As Mercer explained it- the timing of a bill going unpaid and the lien being filed can start with one owner – one possibly unaware of the payment problem – and not surface until the latest owner goes to sell because the lien was filed on the plane after the prior transaction closed.”

Given the complexities of the huge FAA filing systems and the tremendous volume on hand at Monroney- such problems sometimes would be missed by people performing the check. “That’s why it can be worth doing the full search even though the broker just did the same thing a couple of months back-” she explained. “The lien notice may have gone to the old owner and not gotten forwarded to the new owner.”

No one likes surprises that might delay a transaction or increase the costs. So to speed getting useable records to a potential buyer Mercer’s company converts records to pdf format for quick- convenient e-mail transmission to the client. “We can get the buyer all the documents very quickly.”

Going International – No barriers
One aspect of aviation title work that varies from the same work with a real-estate asset is the mobile nature of the aircraft.

Additionally- records for real estate remain local to the jurisdiction in which it’s located. With aircraft- however- mobility is the whole point of the asset. It may change its “home” address many times over its life while operating across the entire surface of the Earth.

Conversely- the only legal repository of an American aircraft’s title- registration and life history is with the FAA – in Oklahoma City – if it was built there- registered there- imported or exported from there. But in another nod to the mobility mission- ownership can move to citizens of other countries – regardless of whether the aircraft actually moves out of the country.

If working cross-country seems complex- working across international borders adds a whole new set of considerations. Indeed- international transactions make up a rapidly growing share of WBAT’s business. “It’s been more and more international lately-” Mercer revealed. “And the international work is still rising.”

This shouldn’t surprise anyone who follows the quarterly and annual shipment reports of the General Aviation Manufacturers Association- which represents a broad international spectrum of planemakers- engine- avionics and systems manufacturers. Over the past three years- the percentage of U.S. aircraft production sold to foreign buyers has risen to more than 70 percent in 2007 from below 50 percent in 2004.

“I think we’ll see more and more international – this year especially-” Mercer observed.

During international transactions- in particular- it can be paramount to use escrow services to protect the integrity of the closing. “We’ve become very used to working across time zones and datelines to make sure the money is where it’s supposed to be and the paperwork gets done correctly-” she added.

Avoiding Common Missteps
So what makes for the smoothest closing? Mercer explains: “One where the person is willing to do all the right things- and let the process proceed normally until everything is done. Make sure you’ve got everything in order before you do the deal.”

That means springing for the title search before agreeing to a deal. “The contract should say the seller has to deliver a clear title at closing-” Mercer advised. “Then they (the buyer) have a way out. I do have people who ask me to pull a title on an airplane they’re going to see before they go.”

Conversely- then- what sort of transaction makes one the most-complicated possible? Mercer answered- “One where the person calls and wants a title and lien search after they’ve agreed to a deal – and then we find problems.

“Too often – even with a purchase as expensive and complicated as an aircraft – buyers take the word of a sincere seller-” Mercer explained. “That’s generally more prevalent at the lower-end than at the higher-end – but it does happen at the higher-end of the market too. Why? People get excited; they want to rush the process and then are unhappy when something unexpected stops them.”

As noted above- the records can show issues of which the seller was unaware. While mechanic’s liens are the most-common problem- old financial liens and other title complications turn up with an unhappy frequency. Often- the problem stems solely from incomplete or improperly executed paperwork. A loan was paid off but the buyer never bothered to file the paperwork necessary to remove the financial lien.

Or perhaps an undiscovered lien surfaces when an estate is trying to sell an airplane owned by the deceased. In such cases- local courts can help clear up the issues – but that means having someone knowledgeable about the intricacies of aircraft transfers to work with the locals to resolve the issue with a court order.

“Sometimes the buyer doesn’t exercise due diligence and signs a contract that doesn’t reflect his interests – and then finds out too late and risks either losing the deposit- or unexpected higher spending. Needless to say- these can be expensive surprises.”

Employing a broker or dealer conditioned to work with a title-service company can be an unheralded benefit of that buyer-broker relationship- she noted. “They can be so useful in providing experienced guidance through the process. It helps to have someone on your side.”

Picking a Title company
Not to add to the already complex nature of buying (or selling) an aircraft- but checking out a broker or a title company just makes good sense for the same reasons you’d pick a knowledgeable maintenance technician for the pre-purchase inspection. You want an expert in that model checking the aircraft’s logs- its compliance with airworthiness directives and physical condition for your peace of mind that comes from knowing the machine is airworthy.

The same peace of mind should accompany protecting your investment by getting a clear bill of health on the aircraft records. Talking to brokers- checking the word of mouth on dealers- asking pros and individuals alike about title firms can all yield valuable insight into the process.

Currently- title search firms lack a professional trade association and the code of conduct and ethics guidelines typical of groups like the National Aircraft Finance Association (NAFA) and the National Aircraft Resale Association (NARA) – a group to which Mercer belongs. An associate member since she started her company- Mercer currently serves as vice chair of NARA’s associate-member advisory council.

Nevertheless- according to Mercer- that lack of a title-firm trade group is in the process of being rectified. Mercer and a competitor are putting together the framework to reach out to others in the business with a goal of launching the trade group later this year. Among the main goals outlined so far for the group are a codes of conduct- a code of ethics and promoting the image and professionalism of title firms.

Be Smart From the Start
Title searches; lien searches; maintenance and accident history: Along with a thorough pre-purchase inspection and a contract that protects the potential buyer- these should be the top issues of concern for any individual or entity contemplating an aircraft purchase.

“People don’t want to buy an aircraft with a title that has a problem-” Mercer stressed. “Getting them a clear title- getting them registered- getting them the hard (registration) card - these are our strengths because we work directly with the FAA in the Monroney office.

“And also important is handling escrow- because you don’t just want to send off money to people without the records and transaction being handled properly.”

You could find those funds have flown away leaving an asset you can’t fly away - and that defeats the very purpose of a transportation asset purchased to shrink a world and shorten work days.

More information from: Wright Brothers Aircraft Title 9075 Harmony Drive- Oklahoma City- Oklahoma 73130 Telephone: (405) 680-9289 Toll-Free (US): (866) 217-5700 Fax: (405) 732-7457 Cell: (405)-326-1446 www.wbaircraft.com

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