NAFA member, Stephen Hofer, President of Aerlex Law Group, shares important information regarding electronic larceny in aircraft transactions.
It was a very different world when I began doing the legal work for aircraft purchase and sales transactions in 1992. The Internet was in its infancy and played no role in the acquisition process. Documents were signed in blue ink and transmitted via fax machine, overnight courier or even through the mail. And we had no serious concerns about thieves trying to steal the sale proceeds or divert deposits.
THAT WAS THEN. THIS IS NOW.
I have handled more than a thousand whole and fractional aircraft transactions in the past 30 years and the closing process has changed completely. If you are thinking about buying an airplane today, you need to realize that criminals operating from every dark corner of the world have figured out that there’s big money involved in aircraft sales and they will do what they can, if they can, to steal millions of dollars from unsuspecting buyers and sellers. The thing that has opened up aircraft transactions to the risk of theft is, ironically, the thing that has made transacting sales so much easier and that’s the Internet and the opportunities it provides for easy, instantaneous, electronic digital execution of documents and transfer of funds.
Aircraft transactions often involve multiple parties in addition to the seller and buyer. Both sides will generally employ brokers, attorneys and accountants, and the buyer may have a lender providing financing. There is almost always at least one title company or law firm in Oklahoma City managing the escrow and handling the filing of documents and transfer of funds and sometimes multiple escrow agents. And with closings often taking place in remote, tax-friendly locations, there’s a good chance that management companies and their pilots will also be involved in the process. Back-to-back and/or international transactions can add further levels of complexity.
This article was originally published by Aerlex Law Group on September 13, 2022.
