aircraft trustee

  • Tracey Cheek posted an article
    The Difference between Filed and Recorded FAA Documents & Why it Matters see more

    NAFA member, Aircraft Guaranty Corporation, discusses what you need to know about filed and recorded FAA Documents.

    There is a difference between the filing and recording of documents at the Federal Aviation Authority (FAA), and it matters when it comes to properly registering your aircraft in trust. This article explores the differences between the two and the effects both unrecorded and improperly recorded documents can have on an aircraft’s title and therefore registration in the U.S. 

    How are documents filed at the FAA?  

    The FAA has strict rules about  how  documents being filed need to look. The seller’s name  must  match the FAA records, only certain titles under signatures are acceptable, there are boxes to check for buyers, and lenders need help releasing outstanding loans or filing new ones.  If any documents are not properly filled out when filed, the FAA could refuse to record them, causing problems for a buyer or owner trustee on down the line.  

    The FAA reviews all documents that are  filed  at or received by the central registry in Oklahoma City, Oklahoma. For the time being, there is a window in the Public Documents Room (PD Room) where anyone can walk up and hand in a document for filing. The window attendant will stamp the document with the date and time it was received. This document has now been  filed  at the FAA. 

    With the digitization of all records, required by the FAA Reauthorization Bill passed on October 3rd, 2018, the PD Room is likely to be less of a factor in timely filings. However, whether in person, by mail, or via the internet, the rules and processes for filing documents remain the same. 

     

    How does the FAA record documents that have been filed? 

    Filed documents are put through a rigorous review process, which can take up to six weeks to complete. The FAA has an extensive list of rules and regulations that documents must meet in order to be eligible for  recording. If you’re not familiar with the rules, specifically those that apply to your situation, there’s a good chance that your document will not be in the proper  recording format. 

    Documents that meet all the requirements are stamped a second time with the new date and time reflecting that the document has been  recorded  by the FAA. They are then placed in the main aircraft file.  

    Interestingly, in most cases, the priority of recorded documents relates back to the filing date, giving “first in time, first in right” status to recorded documents based on the time they were filed, not recorded. In other words, generally,  first to file wins (although this is ultimately decided by a court of competent jurisdiction). 

    If a document is rejected by the FAA because it doesn’t meet their regulations, it is not stamped as recorded and it is placed in a separate file called “suspense”. The suspense file is publicly available, so anyone can view what was filed and by whom, but questions always arise about the validity of these rejected documents. 

    Any unrecorded documents that remain in the suspense file of an aircraft create a “cloud” in the title that will have to be addressed before registering in trust. These unrecordable documents have a profoundly negative effect on an entity’s title, and they can be costly and time consuming to fix. 

     

    Are all documents that are recorded with the FAA valid? 

    While the review process is thorough and careful, it is not always the case that a document is properly recorded. In other words, just because a document is recorded doesn’t mean it’s 100% accurate or valid – clouds may exist even for documents that have been recorded by the FAA.  

    In general, the FAA does not validate the documents that are filed or recorded there. Rather, the registry will record documents if they are submitted correctly and within the allotted time frame.  

    The validity of all documents is ultimately determined by a court of law in the relevant jurisdiction, but you can be pretty sure that there will be challenges to the validity and priority of documents that have not been recorded by the FAA. 

     

    What does this mean to an aircraft owner in trust? 

    Navigating the rules and regulations related to filing documents with the FAA can be tedious at best. The filing of documents is not necessarily the difficult part of the process – meeting all the necessary FAA requirements to get them properly recorded though is a challenge without industry knowledge and experience.  

    There are many possibilities for error in the  registration process,  increasing the amount of time and money spent.  It’s complicated and requires  experts for error-free and timely filings. The main  role of an owner trustee is to represent the interests of the beneficiary, and as such, it is our responsibility to ensure that all documents filed at the FAA are recorded  and kept up to date.  

     

    This article was originally published by Aircraft Guaranty Corporation on January 8, 2020.

  • Tracey Cheek posted an article
    NAFA member, Aircraft Guaranty Corporation, discusses the FAA Registry Update. see more

    NAFA member, Aircraft Guaranty Corporation, discusses the FAA Registry Update.

    The Situation

    There are changes ahead that will modernize the Federal Aviation Authority (FAA) – bringing it up to date with the latest technology and security measures. One of the key updates will be to the registry system, which is vital for ensuring aircraft are legally owned, maintained, and operated.   

    The deadline for the huge overhaul is now October of 2021, which doesn’t seem that far away. The Office of the Inspector General (OIG) recently issued a 29-page report – “FAA Plans to Modernize Its Outdated Civil Aviation Registry Systems, but Key Decisions and Challenges Remain” – regarding the progress the FAA is making in order to meet the modernization mandate. 

    The OIG delved into what they think the FAA needs in place to complete the required upgrade on time – their report put into question whether it could be accomplished, stating: “The Registry’s systems are outdated, and FAA has yet to develop a detailed plan for modernization.”

    The FAA’s plans are not the only consideration in the timeframe though, given the Congress factor. Because “the regulations that govern aircraft registration do not reflect current technology or business practices”, modernizing the FAA’s registration system will require rulemaking by Congress, which can take some time.

    A Modern System

    This is a significant update to the Registry – many provisions were implemented with the Reauthorization Act of 2018 (HR 302) – which Aircraft Guaranty Corporation covered in more depth in Highlights of the 5 Year FAA Reauthorization Act.

    The new registration system, Civil Aviation Registry Electronic Services (CARES), “is expected to streamline processes, allow for the submission of electronic applications and forms, improve controls, automate registration processes, and improve online data availability” according to the FAA. Its key aims are:

    • Web-based access to all public data. For the first time in history, the general public will be able to view FAA records online in real time. Currently, what isn’t already electronically maintained is held in the Public Documents Room (PDR) available for those who have access. Any electronic records are only in real time via the computers at the PDR – outside access is limited to information that is updated once daily.

    The modernization mandate includes digitizing all aircraft registration documents for real-time, public and web-based access, which means phasing out the PDR at the FAA. Furthermore, using the PDR will incur a fee if the business could have been conducted by electronic means as efficiently. 

    • Automation of application services (processes and procedures). For the first time in history, the general public will also be able to file any document electronically. Most aircraft registration functions still require paper documents that are manually scanned and reviewed by Registry examiners. Digitizing and automating the registration process means the role of FAA examiners will change, becoming more high-level. 

    In Order to Proceed

    Detailed estimates of technical and operational requirements for the new system are vital right now – anticipating the rulemaking, cost and schedule that will be necessary to successfully complete the expansive project. Some key questions need to be answered:

    What are the new components/upgrades needed in the new system? The FAA is considering: automated approvals for low-risk applications; automated verification of fraudulent or incorrect submissions; additional security controls such as crosschecking information with non-agency entities; the registry structure, including combining aircraft and airmen systems; and matters of data storage with a cloud- or server-based system.

    How will the FAA fund the new system?It hasn’t been decided yet – funding modernization projects usually comes from its facilities and equipment (F&E) account, but they may be able to use money from its operations and maintenance (O&M) account. This must be decided before it becomes a part of the agency’s budget.

    What rulemaking via Congress is necessary in order to proceed?The FAA will have to develop a rulemaking that revises current regulation and allows for the electronic registration of aircraft –to improve controls, strengthen requirements, and implement digital signatures and electronic payments – a complete outline of the new system is needed beforehand to know exactly what rules to change 

    Now What? – The Challenges

    The OIG report contained four main recommendations to the FAA. The FAA accepted and outlined a schedule for implementing them: 

    1. Develop and implement timeline for making key decisions regarding CARES by May 31, 2019. 
    2. Define desired capabilities of CARES by Dec 31, 2019
    3. Develop and implement a procedure to obtain industry feedback by Oct 31, 2019. 
    4. Develop and implement a plan for maintaining real-time access to data by June 30, 2019.

    There are challenges to face though, including: the transfer of a huge amount of data (with a lot of outdated/large files) to a new system; meeting the needs of registry users – aircraft title companies, financial institutions, aircraft manufacturers, airmen, other government agencies etc. – to ensure the operation of aircraft worldwide; and addressing workforce issues arising from role changes.

    The Transition & After

    The OIG has concerns, but if the FAA stays on track with this schedule, they can meet the October 2021 deadline, barring delays with Congressional rulemaking. 

    Updating and modernizing the new system will be a great improvement but will not fully alleviate all the pitfalls in submitting documents, electronically or not. With the extensive rules in place for filing documents, there is a good chance it won’t be done correctly without industry knowledge of FAA rules and regulations.  

    Furthermore, it is paramount to know What to Look for in Owner Trustee Documents to uphold high standards for creating and maintaining the title to the aircraft. It will still be important to hire a company that knows the ins and outs of the FAA system to avoid costly errors that could take time and money to correct.

    Ultimately, the changes ahead will modernize the FAA’s registry system, helping to bring the aviation industry up to date in technology and security measures. There is significant work to do, but we’re confident that every entity involved in this important endeavor will fulfill expectations. 

    This article was originally published by Aircraft Guaranty Corporation