There are quite a few circumstances that cause clouded aircraft titles. Any break in the chain of title can cause difficulties for owners when they try to buy, sell, or register their airplane. If the problems are overlooked, new owners inherit what the previous owner did not handle. Furthermore, lenders are often hesitant to finance an aircraft if the title is not clear.
If you’re considering buying or selling an aircraft, 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, which is 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.
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 plane. 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. And, generally, anyone angry enough to file a lien against a plane isn’t going to be overly cooperative in signing a release. At least not without some form of compensation.
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 to 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 plane. The list of possible title issues is long, and even the most experienced examiner can still happen upon something they’ve never seen before.
With so many possible problems, it is important to examine the title of any aircraft before buying. Clearing a title can take time, energy, and resources, 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 and how they can help you.