If you purchase or own an aircraft, or if you acquire an interest in an aircraft such as a security or lien interest, you will have to record documents with the FAA to reflect your interest. The documents you will need to record will depend upon your interest, whether as an aircraft owner, aircraft lender, aircraft lessor or aircraft lienholder.
General Recording Information
Documents relating to interests in aircraft are filed with the FAA Registry in Oklahoma City, Oklahoma. Documents must be signed in ink by the appropriate party (e.g. seller, grantor, lien claimant, etc.) or by someone on behalf of the appropriate party with a title acceptable to the FAA (President, Chief Manager etc.). The FAA Registry Examination Guidelines contain a list of titles that are acceptable to the FAA.
The FAA charges a filing fee of $5.00 for each document recorded for each aircraft, engine or propeller. The FAA processes documents it receives in the order it receives them and generally has a document processed within 12 to 16 workdays after the document arrives at the Registry.
Aircraft registration information is also available on the Registry’s website. The FAA updates the Aircraft Registration Inquiry website after close of business on each federal workday. If you file information through the website, it will take approximately 10 days for that information to appear on the website. Aircraft information sent to the Registry via mail will not appear on the website until approximately 21 days later.
Documents Filed By An Aircraft Owner
The Registry maintains information regarding the ownership of aircraft. Only the owner of an aircraft can register that aircraft with the FAA and then only in the legal name of the owner. However, for registration purposes, the owner is not just the buyer of an aircraft, but can also be a lessee of an aircraft under a contract of conditional sale. The owner of the aircraft will file title documents providing evidence of that owner’s ownership of the aircraft. This is typically an FAA Bill of Sale, but can also be a different document such as a conditional sales contract.
Along with the evidence of ownership, the owner will also need to file AC Form 8050-1 Aircraft Registration Application, signed in ink by the owner. Additionally, if the owner is a limited liability company (“LLC”), an LLC Statement will need to be recorded that provides the FAA with proof that the LLC qualifies as a United States citizen and that the signatories on FAA documents are supported by the LLC documents.
The owner will also need to record any documents necessary to remove any open encumbrances on the FAA records to establish “clear title” with the owner. Clear title means there is no unreleased chattel mortgage, security agreement, tax lien, artisan lien, or similar document on record against an aircraft. These “curative documents” can include releases, satisfactions, court orders or any other document that removes the open encumbrance.
Documents Filed By Someone Other Than An Aircraft Owner
Aircraft owners are not the only ones who will need to record documents with the Registry. If the purchase of an aircraft is financed or if someone other than the owner asserts an interest in the aircraft after its purchase, that non-owner interest will need to be documented with the FAA. Examples of these third-party interests include where an aircraft lender records its security interest in the aircraft or a third-party, such as a mechanic or other service provider, files an aircraft mechanic’s lien against the aircraft.
Security Agreement. An aircraft lender will usually record an aircraft security agreement to document its security interest in the aircraft, engines or propellers (also referred to as the “collateral”). The aircraft security agreement must include (1) the names of the parties to the agreement; (2) language which states that the aircraft owner grants the secured party a security interest in the collateral; (3) identification of the collateral by manufacturer name, model designation, serial number, and N-Number.
Aircraft Lien. A party providing services to or for an aircraft may file an aircraft mechanic’s lien to document its lien against the aircraft if that party is not paid for its services. Federal law requires that an aircraft mechanic’s lien be filed with the Registry. This means that for all but a few states that do not have aircraft specific lien statutes (e.g. some states without such lien statutes include Wisconsin, North Carolina, Alabama, Colorado, Delaware and Hawaii), the aircraft mechanic lien must be filed with the FAA registry in order for the lien to serve as notice to third-parties. However, state law determines the validity or enforceability of the lien.
The full list includes the following 35 out of the 50 states: Alaska, Arizona, Arkansas, California (General Aviation Only), Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virgin Islands, Virginia, Washington, and Wyoming.
The FAA does not require a specific document for the aircraft mechanic lien. However, a claim of lien, regardless of the title at the top of the document, must include, at minimum, the following information: (1) the amount of the claim; (2) a description of the aircraft by N-Number, manufacturer name, model designation, and serial number; and (3) dates on which labor, materials, or services were last furnished.
When the FAA receives the aircraft security agreement or aircraft lien, it will then send to the filing party a Conveyance Recordation Notice, AC Form 8050-41. This notice describes the aircraft (and engines, propellers and locations if included), lists the parties and date of the aircraft security agreement or aircraft lien, and shows the FAA recording number and date of recordation. This form can later be used as a release of the security interest or lien if the filing party signs it and returns it to the FAA.
However, this form is not the only acceptable method for releasing a security interest or lien. Another acceptable method is simply a letter signed by the secured party or lien claimant containing the same information and a statement releasing all that party’s rights and interest in the aircraft, engine or propeller.
Documents Filed Regarding A Leased Aircraft
If a leased aircraft is subject to the Truth-in-Leasing requirements of FAR 91.23, the lessee will need to record a copy of the lease executed by both the lessee and the lessor within 24 hours of execution. The lease will need to properly describe the equipment (N-Number, manufacturer name, model designation, and serial number etc.) and will need to include the truth-in-leasing clause from FAR 91.23.
In a situation where the lease contains a purchase option, it may be prudent to submit a draft of the lease to the FAA Counsel’s office for review and an opinion regarding possible registration requirements. Additionally, both the lessor and lessee may agree that it is prudent to locate confidential financial or proprietary information (such as rent, agreed value, return conditions etc.) to an appendix or exhibit.
Cape Town Convention
The Cape Town Convention on International Interests in Mobile Equipment and the Aircraft Protocol (sometimes collectively referred to as the “Convention” or “Protocol”) was recently ratified by the requisite number of states and will be in effect on March 1, 2006. The Convention will apply to all transactions involving aircraft that are certificated for at least eight seats (including crew); helicopters that are certificated for at least five seats (including crew) and engines rated at least 550 horsepower. The Convention requires filings and procedures that are in addition to those discussed above for recording interests in aircraft that are subject to the Convention.
Aircraft will still need to be registered with the FAA. However, interests in aircraft and engines subject to the Convention will also need to be registered at an International Registry (“CTIR”) created by the Convention. Failure to follow the Convention procedures when applicable could result in loss of the aircraft or interest (security, lien or otherwise) to competing creditors or a subsequent purchaser.
When filing with the FAA, filing parties will complete and file a form to be provided by the FAA (AC Form 8050-135) that will describe the relevant parties, the collateral and the interest claimed in the collateral. The FAA Registry will then provide the filing parties with a FAA/Cape Town transaction code that must then be used to make the appropriate registration of an international interest at the CTIR. It is important to keep in mind that the Convention’s requirements are technical and in addition to the FAA filing requirements.
Updating/Confirming Accuracy Of Aircraft Registration With The FAA
According to a December 9, 2005 Notice, the FAA is requiring that aircraft owners check their aircraft registration records online with the FAA Registry to ensure the accuracy of the information and to update the information by February 1, 2006, if necessary. The FAA and TSA believe that national security and aviation safety require this action because it will somehow ensure that only properly registered aircraft operate within the national airspace.
The Notice states that after February 1 “operators of identified aircraft with questionable registrations and or no TSA required security measures/waivers will be: (1) Notified of the deficiency, (2) a pilot deviation will be filed on the operator, (3) operator may be denied access to the NAS. In the event the operator is not the owner, the operator and owner will be notified of the deficiency and both will be subject to any action deemed warranted by the agency in accordance with local, state and federal regulations.”
Although most aircraft registration information is current, aircraft owners whose aircraft registration information may be inaccurate could face enforcement action if the information is not updated as required by February 1. Aircraft owners should confirm that their aircraft registration is accurate to avoid the aggravation of having to respond to the FAA if, for some reason, the information currently on file for their aircraft is not accurate.
Properly recording documents with the FAA Registry is a “necessary evil” if you own, finance, lease or provide services for aircraft. Failure to properly record documents evidencing your interest in an aircraft can result in a complete loss of that interest. If you have questions regarding drafting or recording aircraft transaction documents, you should consult with an experienced aviation attorney. Better to make sure all is in order at the beginning of a transaction rather than risk losing your interest if you wait until the end.
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