- 18 Mar 2019
- Dave Higdon
- Operating Costs
There are various circumstances that cause clouded aircraft titles. Any break in the chain of title can cause difficulties for owners trying to buy, sell or register their airplane. What are the causes, and how can owners avoid them? Wright Brothers Aircraft Title explains…Back to Articles
There are various circumstances that cause clouded aircraft titles. Any break in the chain of title can cause difficulties for owners trying to buy, sell or register their airplane. What are the causes, and how can owners avoid them? Wright Brothers Aircraft Title explains…
If the problems relating to aircraft title are overlooked, new owners will inherit what the previous owner did not handle properly. Furthermore, lenders are often hesitant to finance an aircraft if the title is not clear. Naturally, then, it’s important to understand the following issues fully...
Potential Title Defects
If you’re considering buying or selling an aircraft, you’ll need to understand the potential title defects and problems so that they can be addressed and your purchase will go smoothly.
FAA aircraft records contain numerous documents necessary to maintain the title of an aircraft – including title transfer instruments, liens, security agreements and releases, to name a few – that are filed with the Mike Monroney Aeronautical Center, a branch of the FAA located in Oklahoma City, Oklahoma.
The FAA has a long list of rules and regulations that must be met in order for these documents to be recorded. An aircraft title can only be clear if they are all properly signed and recorded, and there are no unreleased chattel mortgages, security agreements, tax liens, mechanics liens, or similar items on record against the aircraft.
Unreleased Liens or Security Agreements
The most common aircraft title issues are unreleased liens or security agreements on the title. Many of these liens can be 20 or more years old. Finding the parties involved in the transaction can be difficult, leaving a cloud on the title that is difficult to remove.
The difference between a lien and a security agreement is that one is ‘consensual’ and the other is ‘non-consensual’. Consensual means the owner of the aircraft agreed to the lien.
Mortgages and security agreements are consensual. Usually, the buyer of the aircraft borrowed money from the bank to buy his or her airplane. Many of these liens are left outstanding because the lending institution changed hands or went out of business, or was bought by another bank, then another bank, and yet another bank, until all records of the original lien are lost and gone forever.
Getting the most recent successor in interest to sign a release of a lien it doesn’t know anything about can be quite a challenge.
Liens, on the other hand, are non-consensual and are generally placed on the aircraft title without the consent of the owner. These can be from mechanics who believe they are owed money for services rendered, or from taxing authorities who claim to be owed money for unpaid taxes.
Whatever the motive, these liens can be filed against an aircraft at any time by anyone. They can wreak havoc on a title, even if they are not in recordable format.
Generally, anyone angry enough to file a lien against an airplane isn’t going to be overly cooperative in signing a release. At least, not without some form of compensation.
Other Title Clouds
Other title clouds arise from errors in documents, which can be as minor as a missing or incorrect signature or inconsistent owner information on a bill of sale. Often buyers will use a title that is not acceptable with the FAA.
Perhaps a break in ownership is caused by a missing bill of sale, or the missing signature of one of the previous owners of the airplane. The list of possible title issues is long, and even the most experienced examiner can still happen upon something they’ve never seen before.
Check the Title Before you Buy!
With so many possible problems, it is important to examine the title of any aircraft before buying. Clearing a title can take time and energy to perform, and a really mucked up title can be a deal-breaker for some buyers or lenders.
Speak to Wright Brothers to learn more about the experience they have clearing aircraft titles.