In our last blog (Born in a Pool Hall), we talked about the benefits of using an escrow agent to handle funds in aircraft transactions (and pool halls). But there is more to escrow than just taking care of money. There are documents involved as well. Lots of them.
Documents in Escrow
With buyers, sellers, lenders, attorneys, brokers, dealers, and anyone else involved in aircraft transactions these days, located often around the globe, it can be difficult to manage all the documents that need to be signed and filed at the FAA in time for a closing. Imagine if a seller in California mailed a bill of sale to the FAA at the same time a buyer in Texas mailed his app. What would happen if that app arrived and was filed at the FAA first? What about security agreements? Do you think a bank would ever agree to loan money on an aircraft if they were told the release of the previous lien was “in the mail”? What if – Heaven forbid – the release got lost in the mail? Or a bill of sale? The FAA records can be convoluted enough without having issues like these wreaking even more havoc.
Filing and Recording Documents
Furthermore, FAA Rules and Regs for recording of documents is extensive. If you don’t know or understand the system and just send a document directly to the FAA, chances are good that it will be rejected. Fixing a rejected document is a lot harder than one might think. It is always cheaper and easier to file it right the first time.
FAA Response Times
The FAA stays pretty busy processing all the documents that are filed in its offices on a daily basis. Sending out filing times for documents they receive by mail is not a priority. So, when mailing documents directly to the FAA, it might take up to 6 weeks (at least) to hear anything back, and the notice you get might not be what you want to hear. 6-8 weeks after you’ve bought your plane is a not a great time to find out you don’t really own it, or you’re not allowed to fly it anymore.
Efficiency of Escrow
Along with holding funds, therefore, escrow agents also take care of important closing documents. Instead of shipping directly to the FAA, parties to a transaction can send documents to escrow agents to hold for closing. The agents review the documents for errors, helping to insure they are in proper form to be recorded by the FAA. They can then date them at closing, and file them with the FAA – in the order necessary to properly release old liens, transfer title to the new owner, and file a new lien in favor of the current lender. The agents can then provide immediate filing times to the all the parties involved and notify them when their documents have been properly recorded.
Using a qualified escrow agent can really help streamline the closing process and make everyone’s life a lot easier. It is difficult to imagine what Aircraft closings and titles would look like without escrow agents guiding the process.