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 a closing, I would be happy to help. And in the meantime, Happy Holidays.