The Role of an Aircraft Escrow Agent
There are many paperwork “gaps” that can get in the way of you and your aircraft. In our previous blog, you learned about the gap that may occur between documentation Filing and Recording at the FAA. In this article, you’ll learn how gaps can occur during an aircraft sale, such as the time between paying for an aircraft and when the necessary documents are filed with the FAA. Whether you’re a buyer or a seller, here’s how an escrow agent can help prevent closing-time gaps.
Examining Title Liens
It’s up to an escrow agent to examine an aircraft’s title to uncover any lienholders on record who have an interest in the plane; whether it’s a lender, a mechanics lien, or any other source. Escrow agents will contact all interests to ensure that outstanding liens are properly released before the aircraft changes hands. Without this due diligence, interests can surface from unresolved liens during the gap that is created after money is transferred in an aircraft sale.
Preparing Ownership Documents for FAA Recording
The title search information will be used to correctly prepare the documents that are needed for a seamless transfer of ownership. Escrow agents will make sure that the new documents will represent all the lienholders on the aircraft. The escrow agent closes the possibility of a gap by preparing these documents in a format that is acceptable by the FAA for recording. The documents will be signed and held in escrow until every party involved in the sale authorizes filing them in compliance with FAA rules and regulations.
An escrow agent has control over the money transfer as well as when and how documents are filed. They must be able to quickly and accurately get all aircraft documents in escrow to the FAA. Chances are your closing will not be held near the FAA office in Oklahoma City. In most cases, parties involved in an aircraft sale are located throughout the United States and beyond. Wright Brothers Aircraft Title staff members work on site at offices in the public documents room at the FAA, which allow them to file documents immediately for timely processing. This eliminates the risk of a lengthy gap that can cause problems for new aircraft owners.
The aircraft buyer is responsible for all liens. Problems occur when old liens are not released, even if a new lien holder properly files the paperwork. The result is a clouded aircraft title, as it’s unclear whether the old lien holders still have an interest in the plane. When this occurs, the new liens will not be recorded by the FAA. For more information, read our blog on Clearing Clouded Aircraft Titles.
The new lien holder and buyer must be sure that old liens are properly released, so when new documents are filed with the FAA, they can be put in a priority position. This is known as “filed for recording,” or FFR.
How are liens handled at closings?
The FAA does not remove liens or issue anything that states an aircraft title is clear. They simply provide a repository for the filed documents. It’s up to the buyer to ascertain that an escrow agent is correctly handling interests on the plane before it is purchased.
The escrow agent must take care of all liens and have all new documents, such as the bill of sale and the application for registration, prepared for recording prior to signing the bill of sale at the closing. When money is released and ownership is transferred, the escrow agent will file all the prepared documents with the FAA.
Escrow agents play an integral part in an aircraft sale. A reliable agent will eliminate the risks involved with gaps that may otherwise occur throughout the sale process.