Can you be sure a pre-existing lien on your aircraft won’t come back to bite you? Gerrard Cowan polls a selection of experts to understand the nature of liens, how to check and safeguard against them, and what to do if a notice of foreclosure is served...
Liens can be a complex factor in business jet ownership, posing financial challenges for aircraft operators. Owners must ensure they fully understand the nature of any liens on their own aircraft, according to industry experts, while buyers should secure the best possible industry advice in any transaction.
There is a wide array of liens that can attach to an aircraft, its engines, or related components. But it is liens relating to financing that tend to be enforced more than other types, according to Brian Macbean, Director of Credit & Sales at AOPA Aviation Finance.
“Any time the aircraft is used as collateral for a loan, the lender will file a lien on the aircraft. Lenders that specialize in aircraft financing often file liens on the aircraft, the engines, and the avionics,” he adds, pointing to the prevalence of mechanics’ liens, also.
Liens on US-based aircraft should always be filed with the FAA, Macbean notes. “Depending on the specific scenario, a Uniform Commercial Code (UCC) filing could also be an effective method to assert interest or influence relating to an aircraft.”
Liens generally fall into two categories, according to Lori McGee, Partner at Jetstream Aviation Law, including consensual and non-consensual liens.
Consensual liens are typically agreed-upon between a lender and an owner, or another party with an interest in the property, McGee elaborates. For example, this could include aircraft mortgages and security agreements.
Non-consensual liens arise by operation of law, not as the result of an agreement between the parties – mechanics’ liens being primary examples. In the US these are governed by state law and vary from one state to another.
“Although the specifics of this type of lien are different in each state, generally speaking [they] are meant to provide a person that performs work or supplies materials for an aircraft with an interest in that aircraft to secure payment for such work or materials," McGee says.
This article was originally published by AvBuyer on November 20, 2023.