Skip to Main Content

title & trust

  • NAFA Administrator posted an article
    Owner Trusts as a Solution for Cross-Border Transactions and Related U.S. Customs Issues see more

    NAFA member, Michael Hoggan, Senior Vice President with TVPX, discusses owner trusts, cross-border transactions, and U.S. Customs Issues.

    The U.S. is the most popular jurisdiction in the world in which to register aircraft. The FAA’s maintenance and operational requirements are widely respected and the legal precedents regarding title priorities and lender rights are well established.

    Buyers and sellers who are not U.S. citizens often utilize an owner trust when registering aircraft in the U.S. This is because aircraft registered in the U.S. generally must be owned by a U.S. citizen. These aircraft may remain registered in the U.S. for the entire ownership period. However, many times FAA registration is needed for only a short time to facilitate a cross-border transaction.

    For example, a foreign seller may need an owner trust to register the aircraft in the U.S. in preparation for a sale, or a foreign buyer who closes on a purchase in the U.S. may need a trust to legally operate and remove the aircraft to the buyer’s home jurisdiction.  Another example is the situation in which foreign buyers and sellers use an owner trust to take advantage of the numerous bilateral agreements the U.S. has with foreign jurisdictions for reciprocal airworthiness certification.  Such trusts can remain in effect for as long as necessary, depending on the customer’s particular needs.

    Cross-border transactions in the U.S. also involve customs issues. For example, a foreign seller may bring an aircraft to the U.S. in preparation for a sale, a U.S seller may remove an aircraft to another jurisdiction for sale, a foreign buyer may remove a recently purchased aircraft from the U.S. to be based in another jurisdiction, or a U.S. buyer might bring an aircraft purchased overseas back to be based in the U.S. These situations all require a proper U.S. customs entry or export.

    Recently, there has been increased scrutiny of aircraft imports and exports by U.S. regulatory authorities, in large part due to confusion many people have about what it means to import or export an aircraft properly.  Some people wrongly believe that aircraft on the N registry do not need to be imported or exported through customs. Other people are under the mistaken assumption that an Export Certificate of Airworthiness issued by the FAA satisfies the requirements for an export for customs purposes. These can be very costly mistakes. Fortunately, a proper import or export is easy and inexpensive to accomplish through a U.S. customs broker familiar with aircraft transactions. However, it is critical that the broker is retained prior to moving the aircraft into or out of the United States so that the required customs process is followed.

    The keys to a successful cross-border transaction are retaining qualified advisers and advanced planning. The experienced TVPX owner trust and U.S. customs brokerage teams can help clients avoid common pitfalls. For assistance with owner trusts for short or long-term U.S. registration purposes, please contact Scott Nielsen at +1.801.877.0509 and scott@tvpx.com or Jackson Frandsen at +1.801.797.4869 and jackson@tvpx.com. For assistance with an import or export through U.S. customs, please contact Tobias Kleitman at +1.978.610.1150 and tobias@tvpx.com

    This article was originally published by TVPX on February 16, 2021.

  • NAFA Administrator posted an article
    Why do non-citizen trust agreements contain language limiting a trustor’s control over the trustee? see more

    NAFA member, Scott Nielsen, Chief Marketing Officer with TVPX Aircraft Solutions, discusses Non-Citizen Trust agreements.

    Why do NCT trust agreements contain language limiting a trustor’s control over the trustee? 

    One of the few ways non-US citizens may register aircraft in the United States is to form a Non-Citizen Trust (“NCT”) whereby a US citizen company is appointed as trustee to own and register the aircraft on behalf of the non-US citizen. The NCT agreements include fairly strict language limiting the amount of control (“Control Language”) the non-US citizen can exert on the trustee. For example, trustees have full discretion to take actions related to the ownership and operation of the aircraft that is subject to the NCT. Such language is not an invention of trustees.  The US Code and FAA rulings make it clear that the registered owner of an aircraft must be actually controlled by a US citizen and may not be merely an agent of a non-citizen*. The issue surrounds concern about control of the US air transport industry and fear that aircraft assets may be used nefariously or “against the best interests of the United States”. 

    In theory, the Control Language seems extremely problematic. In practice, the provision is rarely ever an issue.  First of all, any discretionary action taken by the trustee as outlined in the Control Language must be done “with due regard for the interests” of the non-US citizen.  Second, the aircraft operating agreement which accompanies every NCT, grants the non-citizen beneficiary or its designee the sole right to operational control of the aircraft, as well as the obligations to conduct operations within the parameters of FAA regulations, as any FAA authorized operator would be. The trustee has no interest in becoming involved in actual aircraft operations.   

    Finally, it should be noted that while the Owner Trustee is the legal owner of the aircraft and retains control for the express purpose of “protecting the interests of the United States,” the non-US citizen is the beneficial owner of the aircraft and retains all economic benefit. The trust is a pass-through entity meaning all income “passes through” the trust to the beneficial owner. The Trust Agreement precludes the Owner Trustee from selling the aircraft without the beneficial owner’s authorization, and any proceeds from such a sale go directly to the beneficial owner.   

    The owner trust structure is such an attractive option for aircraft registration in the US because it allows both the regulatory agencies and the aircraft owner to achieve their primary objectives. Regulatory agencies are assured of the registered owner’s compliance with the US citizenship requirements and the aircraft owner can have the aircraft registered in their preferred jurisdiction, while still having decision making authority as to operations and the ultimate sale of the aircraft. 

    For information about owner trusts please contact Scott Nielsen at +1.801.877.0509 or scott@tvpx.com.   

    *For the incurably curious, the citations can be found in 49 USC 44102 and 49 USC 40102(a)(15).   

    This article was originally published by Scott Nielsen with TVPX Aircraft Solutions on February 10, 2021.

  • NAFA Administrator posted an article
    Four Common Mistakes That Can Delay Your Aircraft Purchase: Ways To Keep Headaches To a Minimum see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, shares tips for making sure your aircraft purchase goes smoothly.

    You found the right airplane for your mission; you have a lender and now you are days away from your final goal—landing the aircraft of your dreams. Out of nowhere, you get a phone call from the lender. A last-minute mix-up now threatens to stall or upend the deal. What happened? Here are four common trip-ups:

    1. Last-minute ideas
    Did you change your mind midway through the deal regarding how you wish the airplane to be owned, or how the airplane will be used? One of the biggest delays comes from buyers who suddenly decide their airplane should not be personally owned but instead owned by an LLC. 

    First, you’ve now altered the financial picture from which the lender is basing the parameters of the loan. Second, you’ve just added complexity to the deal. Complexity adds time. Third, an aviation LLC is different than other LLCs. The nuances are significant enough for us to suggest you contact AOPA Legal, or an aviation attorney before initiating the paperwork.

    2. Title issues
    Did you forget to order a title search from a reputable title company? Missing logbook signatures, an unqualified person making a logbook signoff, the presence of a heretofore unseen lien are all examples of items that can put a “cloud” on a title. Before the title can be cleared, a title company must do due diligence. 

    3. Pre-buy inspection
    What could possibly go wrong with a pre-buy inspection? How about the aircraft is stuck overseas? How about a dispute between the seller and buyer as to where the pre-buy will occur? How about a pandemic that shuts down business operations and air travel for an unspecified amount of time? From the mundane to the previously unimaginable, myriad things can affect the pre-buy. That’s why a Pre-purchase Agreement is vital. In it, all the parameters of a pre-buy are codified and agreed to prior to, hopefully mitigating as many possible obstructive circumstances as possible.

    Even with that, the pre-buy inspection will invariably uncover some addressable item. That item’s resolution will then have to be negotiated into the price if it’s not an airworthy item, or fixed and inspected prior to, if it is an airworthy item.

    4. Paperwork
    Illegible logbook documentation, missing paperwork, documents missing a notary’s required imprint— are a partial list of paperwork problems that could slow the closing process. AOPA Aviation Finance can help build a paperwork checklist early that will help prevent this pitfall.

    This article was originally published by AOPA Aviation Finance Company on November 23, 2020.

  • NAFA Administrator posted an article
    Keeping the Title Clear on Your Aircraft see more

    NAFA member, Amanda Applegate, Partner with Aerlex Law Group, discusses keeping your aircraft title clear.

    As an aircraft owner, it is important to make sure the title to your aircraft remains clear. Unlike some other countries, in the United States we have an owner based registry where liens can be filed on the aircraft by anyone.  Since a notice of a lien can be sent to the FAA Civil Aviation Registry (the “Registry”) without the knowledge of the aircraft owner, sometimes these filings create valid liens on the aircraft and other times a cloud on the title is created by these filings.  It is a good idea to have a title search of the Registry and, if applicable, the International Registry, done annually to make sure there are not any issues with the title of your aircraft. If this annual review is not done, then at the very least title searches for your Aircraft should be done when the decision is made to market the aircraft for sale.  By conducting the searches prior to finding a buyer for the aircraft, if it is discovered that there are encumbrances/liens which have attached to the aircraft or clouded the title, that have not been properly released, then such encumbrances/liens can be addressed early in the sales process.

    I recently worked on a transaction where at the time of the purchase the aircraft the owner had financed the aircraft. Subsequently the loan was paid off but the lien release was never filed with the Registry. Ten years later during the process to sell the aircraft, the lien was discovered. To further complicate matters, the lender was no longer in business. A simple title search run annually or even every other year could have caught this issue much sooner and made the time to research and resolve the lien easier and less costly. In another recent transaction the aircraft owner discovered that there were five liens on the aircraft because the management company for the aircraft failed to pay for maintenance that was performed on the aircraft prior to the management company going out of business. The owner of that aircraft did not know of the liens until the aircraft was under contract to be sold and the escrow company, as part of the sale process, performed the title searches on the Registry. Having to track down five lienholders in a short timeframe in order to avoid the sale from being delayed added unnecessary stress to the closing. 

    There are many great escrow companies, in Oklahoma City, where the Registry is located. The escrow companies will perform the searches on the Registry for a few hundred dollars. In order to perform the searches, the escrow agent simply needs to know the make, model and serial numbers of the airframe, engine(s) and propellers (if applicable).

    In addition to liens filed on the Registry, an international interest can also be registered on the airframe or engines of an aircraft of a certain size on the International Registry that exists as a result of the Cape Town Treaty, which the United States is a signatory. However, the International Registry is a two- party system and requires consent from the aircraft owner before the international interest is registered against the aircraft. As a result, it is less likely that an international interest will attach to the aircraft without the knowledge of the aircraft owner. However, when an aircraft loan is paid off, the aircraft owner should request post-closing International Registry searches evidencing the discharge of the international interest.

    In short, for a bit of annual work at a nominal cost, an aircraft owner should conduct annual searches at the Registry to ensure that the aircraft title remains clear of any unknown or unwarranted liens or encumbrances that have attached to the title or are clouding title of the aircraft. For various reasons, this will save the aircraft owner headaches in the future when the aircraft is sold.

    This article was originally published by Aerlex Law Group in Articles, BusinessAir Magazine, The Latest, on August 4, 2020.

  • Tracey Cheek posted an article
    FAA Makes Changes to Public Documents Room Due to COVID-19 see more

    NAFA member, Debbie Mercer-Erwin, President of Wright Brothers Aircraft Title, Inc., shares the latest update on the FAA Civil Aviation Registry and Public Documents Room.

    In light of the continued spread and impact of COVID-19, or Coronavirus, the FAA Civil Aviation Registry has issued new procedures affecting the Public Documents Room (PDR) in the Mike Monroney Aeronautical Center.

    The change in processes comes in an attempt to minimize exposure to employees, permit-holders who regularly access the PDR, their families and the public at large.

    The FAA intends to keep the PDR open and “provide essential services while maintaining social distancing and restricting physical public access.” 

    There are now temporary measures in place, effective as of 8:00 am, Thursday, March 19, 2020, to help slow the spread of Coronavirus and maintain efficiency at the Registry. 

    While the PDR remains open for their usual hours, 7:30 to 4:00 CDT, the “filing” window has been closed, which removes the ability to immediately file documents. 

    For now, document submissions will be collected from drop boxes located directly outside the PDR – hourly for those qualifying as “priority” and twice a day for those that do not. 

    During this time the Registry will not provide “minute-by-minute” filing stamps. Digital submissions are allowed if all closing documents are digitally signed and less than 20 pages.

    Documents can still be mailed via the usual means, but there is now a temporary email option as well. 

    Documents can be emailed following certain requirements: all digitally signed, attachments 20 pages or less per document, one aircraft per email, and priority indicator.

    Another notable change is that the FAA cannot guarantee “in by 11 out by COB” expedited processing of documents for imports. 

    There are also changes to payment services, which should now be completed online at pay.gov. A receipt can be generated to be submitted to the Registry if filing documents via email. 

    It may be a while before we fully see the effect these changes have on document filing and transactions, but there will certainly be some delay while we become accustomed to the new procedures.

    While disruptions inevitably continue for industries worldwide, we are encouraged by the actions our leaders and communities are taking to protect our health and help businesses continue to run. 

    This is a summary of details regarding the FAA’s PDR changes. For more information and assistance please contact your local agent.

    This release was originally published by Wright Brothers Aircraft Title, Inc. on March 20, 2020.

  • 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
    Title Insurance Ensures a Clean Title see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, answers your questions about title insurance.

    One aircraft owner recently shared his story that might be illustrative. When he bought his first airplane, a used C-182. The buyer entered into an agreement to purchase the aircraft from a respected aircraft dealer, however, after the transaction was supposed to have closed things quickly unraveled. The dealer had set up escrow with a small title company and the buyer trusted this firm was competent to coordinate the closing. Unfortunately, the escrow company never properly filed documents or distributed proceeds to the appropriate parties. After a lot of finger-pointing, the seller no longer had clear title to the plane, the buyer did not have possession of the plane, his lender was still expecting him to make payments and the dealer had a huge headache! 

    Eventually the seller got paid, the buyer got the plane and the lender began receiving loan payment but not without each of them having to expend tens of thousands of dollars on legal expenses. Had the owner obtained title insurance (along with a lender policy), they and their lender would have had all their legal expenses covered. More importantly though, the event would not likely have happened as the title insurance company would have ensured the buyer was working with a competent title and escrow company.

    Title insurance "is a contract between the insurance company and the insured that protects the title of the insured on a specific aircraft from risk and challenges to the insured’s title arising from covered events.” Events like improper lien filings.

    Or like when a title search done as part of a normal sale and the title initially comes up clean. The deal closes, but a mechanic’s shop finds out about the transaction. The shop manages to file a lien just post-closing, however, the FAA accepts the lien after the fact. The new owner now is unaware of this cloud on their title.

    Another instance is when a bank's lien release is not properly filed during a sale. The sale goes through, but the FAA subsequently rejects it due to an improperly executed lien release. Again, the owner isn’t notified so remains unaware of the cloud now on the title.

    Only when it’s time to sell the aircraft, and the new buyer conducts a title search do these issues typically get discovered. It could be a simple paperwork issue. But what if it’s not? What if the bank that held that loan is no longer in aircraft lending? Or what if it's merged with another bank that does not make aircraft loans? Without title insurance, the burden and the cost of clearing the title will fall upon the aircraft owner.

    What if a title search reveals a previously unknown tax or mechanic's lien on your aircraft? Big trouble. Usually, the courts will subordinate your rights to those of the lienholder regardless of how vigorously you spend to defend your position as the owner. Whichever individual or entity has the lien can legally take possession. At AAF, we've seen this happen. A bank or a shop will give notice of intent to take possession and liquidate aircraft.

    Let’s say a $100,000 airplane gets seized because of a $50,000 lien. The aircraft owner must satisfy the $50,000 to the lienholder to recover their airplane. If they choose not to, the lienholder can sell it. If that entity can only get $80,000 for the airplane, then the net to the owner would be $30,000-- assuming they paid cash for it. If the aircraft had been financed, that $30K goes to the lender. The owner is left with no aircraft, no equity, yet with a loan still outstanding.

    Title insurance removes uncertainty. If necessary, title insurance provides, at no cost to the insured, a legal defense team to defend or assert the insured’s title in court. If the court rules that another entity has superior title, the company will pay for loss of title. That’s a lot of peace of mind for not a lot of money.

    This article was originally published by AOPA Finance on September 17, 2019.

  • Tracey Cheek posted an article
    Aviation Trustee Resignation: Practical Advice for Hiring a Successor Trustee see more

    NAFA member, David Wall, Senior Trust Counsel with TVPX Aircraft Registration Services, LLC., offers advice when hiring an aviation trustee.

    Trusts are commonly used and universally accepted in aviation. Thousands of aircraft have been placed into trusts over the past several decades and the use of trusts has become integral to many aviation ownership, financing and leasing structures.

    However, recently a new issue has arisen that forces some owner participants, lessees and lenders to carefully consider their options and take decisive action. How do you proceed when your trustee resigns from its role?

    Receipt of a Resignation Notice

    A trustee’s decision to resign may result from conflicts with another party, lack of payment, perception of increased risk, corporate restructuring or a general move away from the line of business. The trustee will commence the process by sending an official notice to the required parties of its intention to resign as trustee, along with a request that the owner participants appoint a successor trustee. In some cases, the trustee may provide an informal notice prior to the official resignation notice to provide the parties more time to plan for the transition to a successor trustee.

    Most trust agreements require the trustee to give 30-days advance written notice of resignation. In that time the owner participants are required to find and appoint a new owner trustee. Often the process of appointing a successor trustee, especially with complex transactions and structures, may take far longer than 30 days. Fortunately, resigning trustees have been reasonably flexible about granting additional time.

    A trust cannot be left without a trustee, so the trustee must remain in the role until a successor is either voluntarily appointed by the owner participants or appointed by judicial action. The process of getting a court appointed trustee is somewhat cumbersome and may result in aircraft registration and loan issues, so should be avoided if possible.

    Choosing a Successor Trustee

    When selecting a successor trustee, owner participants should consider the party’s qualifications, experience and continued commitment to the aviation industry.

    A potential successor trustee must meet all the qualifications of trustee under the trust agreement. In aviation transactions, especially those with U.S. FAA registered aircraft, this will typically include that the successor trustee qualifies as a U.S. citizen pursuant to 49 U.S. Code § 40102(a)(15). There also may be other qualifications to consider such as capitalization or rating agency requirements. Some qualifications can be waived by the owner participants and other parties, but regulatory requirements, such as U.S. citizenship, must always be satisfied.

    The parties should also vet any successor trustee based on its experience in similar transactions and capability to perform all the functions set forth in the trust agreement. Consideration should also be given to the successor trustee’s long-term commitment to serving as a trustee in the aviation industry. The successor process can be lengthy and expensive, so choosing your successor trustee wisely may avoid the need to repeat the process in the future.

    Documenting the Resignation and Succession

    The process of documenting the introduction of a successor trustee can be approached in several ways but must involve all interested parties.

    In most situations, the resignation and succession has been handled by way of an instrument between the original trustee, successor trustee and owner participants. Often the resignation of the trustee, the appointment of the successor trustee by the owner participants and the acceptance by the successor trustee of the appointment is handled in one document. In other cases, the old trust and lease are terminated, and the owner participants enter into new agreements with the successor trustee. In either case the parties may need to agree on certain matters related to the registration of the aircraft and will want assurances that the other parties will execute related documents and take such other actions as are necessary to facilitate the appointment of the successor trustee.

    Transaction related documents will usually also need to be amended and/or assigned. Lenders should be notified early in the process as they will want to ensure continuation of their security interest. Additionally, lessees should be involved in the process so that leases can be properly assigned, or new leases put into place.

    Consideration should be given to documents that need to be filed with aviation authorities with jurisdiction over the aircraft. For any aircraft registered to the trustee with the U.S. FAA, the resignation and succession documents must first be reviewed and approved by FAA Aeronautical Center Counsel and then they can be filed with the FAA along with the documents necessary to register the aircraft to the successor trustee.

    Avoiding Common Issues

    The best approach to avoiding problems when appointing a successor trustee is to assemble experienced aviation advisers just as you would at the commencement of a transaction.

    If there is financing on the aircraft in the trust, the trustee and owner participants are likely required by the loan documents to notify the lender of any change of ownership. Lenders may have different preferences about how to document the appointment, either by amendment or assignment, or may have other requirements, so a failure to involve the lender early in the process may cause delays or create liability under the loan documents.

    Lessees and operators should also be notified early of the introduction of the successor trustee. If the trustee is the registered owner of the aircraft, the appointment will require a new registration with the U.S. FAA and potentially with other aviation authorities. The lessee may help identify timing for the successor trustee to enter the structure based on the schedule of the aircraft to avoid liability for certain taxes. Lessees may also need to provide new certificates of insurance.

    Involving experienced aviation counsel is essential to avoiding many issues. If the successor trustee will be the new registered owner, potential tax exposure must be considered. In the U.S. and many other jurisdictions, changing the trustee of an existing trust would typically not be considered a taxable event, however, the fact that the registration will change may invoke queries from taxing authorities and some states may view the tax issues differently. Having legal counsel review the applicable tax rules is critical to avoid tax risks.

    In Summary

    While receipt of a letter of resignation from a trustee is an unenviable situation, with proper planning and attention to the following steps:

    • Prompt reaction to a letter of resignation and establishment of communication with the trustee;

    • Thoughtful selection of a qualified successor trustee;

    • Consideration of necessary required documentation; and

    • Engagement of experienced advisers

      the introduction of a successor trustee can be safely and efficiently accomplished.

      For additional information about the trustee resignation and succession process, contact the TVPX trust professionals, David Wall, Brett King, Mike Hoggan or Scott Nielsen at +1 801.877.0478 or visit our website at www.TVPX.com.

    This article was originally published by TVPX Aircraft Registration Services, LLC. on August 15, 2019.

  • Tracey Cheek posted an article
    Using Digital Signatures in Aircraft Title & Registration see more

    NAFA member, Debbie Mercer-Erwin, President of Wright Brothers Aircraft Title, discusses the use of digital signatures in the aircraft title and registration process. 

    It is an exciting topic and a fundamental priority for Wright Brothers Aircraft Title (WBAT) to stay current with technology, especially when it has the potential to increase efficiency and security in our services, as well as help reduce time and cost in transactions for our clients. We are always looking forward to how our company could put certain applications to use, even Blockchain in Aviation Escrow Transactions. For this month’s topic, we don’t have to guess though. 

    One huge hindrance to efficiency in aircraft title registration is the paperwork involved – handling and distributing numerous paper documents between multiple parties, whether in the United States or internationally. Printing, signing, mailing – more than once if corrections are needed, let alone if the documents are lost in the mail altogether – is enormously time-consuming. 

    WBAT wanted to find a way to streamline certain processes and reduce our amount of paperwork, while maintaining a high level of security – to save time and money within our business and for our clients. We were immediately interested in the use of Digital Signatures, which is a specific implementation of an electronic signature (eSignature).

    The US Federal ESIGN Act defines an eSignature as “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record”. A Digital Signature takes this a bit further with the addition of encryption/decryption technology – securing the data associated with an electronically signed document and creating a robust audit trail.

    Digital Signatures have been used for electronically signing an array of documents – sales contracts, offer letters, lease agreements, liability waivers, financial documents, etc. – and are legally enforceable in most business transactions throughout most of the world.

    We needed to make sure this solution would work with multiple signers on complex documents though and be compliant with the Federal Aviation Authority guidelines, including their Notice of Policy Clarification for Acceptance of Documents With Digital Signatures (81 FR 23384), which requires Digital Signatures – traceable and digitally encrypted – not just eSignatures.

    DocuSign was the clear answer for our business – meeting some of the most stringent US, EU, and global security standards, and using the strongest data encryption technologies available. It also happens to be the leading eSignature brand, with the ability to:

    • Easily upload and send documents for signing
    • Sign at any time, on a wide variety of devices, from nearly anywhere
    • Check signing status and send reminders to keep things moving forward

    This software has enabled us to get agreements done faster with fewer errors, which directly translates to lower cost, for our business and our clients. We’ve accomplished this with using Digital Signatures mainly for Bill of Sale and Application for Registration documents, which directly benefits our buyers and sellers.

    There are more benefits on the horizon though with more widespread use of this technology. With more lenders in the industry using Digital Signatures, it might not even be necessary to presign a release of the lien. Instead, the involved parties would digitally sign at closing when money is distributed, reducing the risk for all. 

    We’re excited to see where this technology takes us and the aviation finance industry. In the meantime, we’re thrilled with the results we’ve already seen and the time and cost savings we’re able to pass down to our clients. 

    This article was originally published by Wright Brothers Aircraft Title on September 16, 2019.

     

  • Tracey Cheek posted an article
    What Are The Benefits Of Title Insurance For An Airplane Purchase? see more

    NAFA member Adam Meredith, President of AOPA Aviation Finance Company, answers your questions about title insurance when purchasing an airplane.

    Question: I’m planning to purchase a used airplane in the next 6-months. I’ve heard some owners talk about not needing title insurance? Wouldn’t this be required by a lender? I’m familiar with title insurance for a home purchase, but what exactly are the benefits of title insurance for an airplane purchase?

    Answer: Surprisingly, no, many lenders do not currently require title insurance on every transaction. 

    Similar to a home, your aircraft also has a title history which should be reviewed before buying. While most AOPA members know the importance of this and perform a title search prior to buying an aircraft, many may not know there are numerous scenarios where a lien or claim can end up in the FAA registry and/or otherwise “clouding” your ownership interest. By obtaining title insurance, the title insurance company will defend you legally against any bogus claims.  

    Question: I would like to purchase my first airplane this year. My price range is about $50k.  I’ve been looking at your website and the list of financial documents you will require, especially for a business owner like myself, seems daunting. Are there any other options for someone like me? I have good credit and good cash flow.

    Answer: While providing the full list of financial documents gives you the most lending options, some of our lenders do offer low doc products. The underwriting guidelines tend to be more constrained, however, for well-qualified borrowers all that is needed is an application. Because this product does not require supporting financials rates will average .25-.75% higher than our most competitive options. If you are interested in more details about this low doc option, please give us a call and we can give you a more specific rate quote.

    This article was originally published by AOPA Aviation Finance Company on May 3, 2019.

  • Tracey Cheek posted an article
    OIG Reports on FAA Registry Update - What Does It Mean? see more

    NAFA member, Debbie Mercer-Erwin, President of Wright Brothers Aircraft Title, discusses the OIG, the FAA Registry Update, and what it means for the aviation industry. 

    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 Wright Brothers Aircraft Title 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 of the pitfalls to closing yourself that we outline in our blog, Can’t I Handle My Own Aircraft Closing?. 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 Wright Brothers Aircraft Title on their blog on July 16, 2019.

  • Tracey Cheek posted an article
    Preparing for an Aircraft Purchase: How to Become the Most Prepared and Qualified Buyer see more

    NAFA member, Amanda Applegate, Partner at Aerlex Law Group, shares tips on how you can become the most prepared and qualified buyer when purchasing an aircraft.

    As the supply for quality pre-owned aircraft inventory has begun to shrink (especially in certain large cabin models), I see more buyers devoting time to advance preparations to ensure that they are perceived by sellers as the most qualified, attractive buyer. If you are in the market for an aircraft and want to expedite your purchase and closing, consider taking the following steps prior to making your first offer.

    BUILD YOUR ACQUISITION TEAM EARLY & PRIOR TO THE FIRST OFFER
    Aircraft Broker/Consultant – Select a consultant or broker who knows the global market for the aircraft type you are purchasing. The broker/consultant must also be respected among his peers. There are certainly instances when an offer is not taken as seriously if the broker representing the buyer lacks experience with the particular category of aircraft being sought or has had previous conflicts with the broker on the other side.

    Aviation Counsel – Retain counsel in advance so she is ready to jump into a deal once the aircraft is selected. This will save valuable time later. Including a provision in the Letter of Intent (“LOI”) that the buyer will have an initial purchase agreement to the seller within three days of signing of the LOI will be very appealing to a seller. But this can only happen if aviation counsel has already been identified, retained, and is up-to-speed on the specifics of the deal.

    Technical Representative – Hire the right technical expert so that he is ready to start immediately once the aircraft is identified. The technical representative will review aircraft maintenance records and identify any inspection items that must be rectified. The technical representative can also help determine which aircraft is the best aircraft to make an offer on, based on aircraft pedigree.

    Lender – As in all transactions, sellers prefer cash deals. But if the aircraft is going to be financed, contact lenders and select a lending partner before a specific aircraft is chosen so that lenders are able to close quickly once the aircraft is identified.

    Management Company – Is the aircraft going to be managed by a third-party provider? Will charter be allowed on the aircraft when not being used by the aircraft owner? Selection of a management company early in the process means you will have the management company acting as your advocate throughout the acquisition. Many management companies don’t start charging management fees until the aircraft is acquired, so there is valuable advice available at little cost by selecting early.

    Insurance Broker – Decide if the insurance will be procured through the management company or if you need an insurance broker to provide the comprehensive coverage to diminish liability concerns.

    Escrow Agent – Identify your escrow agent and obtain their wire instructions so you are ready to send a deposit as soon as you have an accepted LOI. This demonstrates to the seller that you are a committed buyer.

    ESTABLISH YOUR OWNERSHIP STRUCTURE

    Your aviation counsel can help you determine the following: What entity will own the aircraft? Does the proposed structure make the most sense, based on the intended use of the aircraft and the potential tax implications for those who will use the aircraft? Is the ownership structure legal under the Federal Aviation Regulations?

    Retain a qualified aviation tax attorney and CPA who can review the ownership structure to make sure it is the best tax-plan available. 

    What are the sales and use tax consequences of the ownership structure?

    Are there adequate liability protections under the ownership structure or at least adequate insurance for all parties involved in the ownership structure?

    DON’T SWEAT THE SMALL STUFF

    There are a number of miscellaneous items that often get negotiated in the LOI and purchase agreement. These items comprise a small amount of the overall transaction cost, and having flexibility on them may make your offer stand out. Understanding the cost of these items and your position on them before the LOI may allow your offer to appear more competitive than another offer. One approach is to have the seller pay all of these costs and then adjust the purchase price higher since that is the number the seller will most likely focus on. Some of the small items are Escrow Fees, Aircraft Movement Costs, Customs and Registration Change Fees (if applicable), and Registration Number Change Fees.

    Spending time and effort at the beginning of the aircraft acquisition process to prepare as much as possible, can lower the naturally-occurring stressors related to aircraft transactions.

    Please contact Amanda Applegate at 310-392-5200 or aapplegate@aerlex.com.

    This article was originally published in BusinessAir Magazine, May 2019, Volume 29, No. 5.

  • 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

  • Tracey Cheek posted an article
    Airplane Acquisition Checklist Series: Part Two: Purchase and Delivery see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, follows up with part two of the Airplane Acquisition Checklist covering Purchase and Delivery.

    In Part 1 of this series on airplane acquisition, we discussed the most efficient way to approach buying an aircraft by using three checklists—Pre-purchase, Purchase and Aircraft Delivery. We also detailed the Pre-purchase Checklist.

    You're now staring at your ideal airplane on your screen. Time to run the Purchase Checklist:

    • Escrow, Letter of Intent and Purchase Agreement
    • Notify Lender
    • Pre-purchase Inspection
    • International Registry (if applicable)
    • Insurance
    • Title Search and Background Checks

    Escrow, Letter of Intent and Purchase Agreement. Escrow appears in all three checklists. Before it was a reminder to get your down payment together. Now it triggers you to move money into an escrow account that you set up through your escrow agent. If you're unfamiliar, AOPA has a strategic partnership with Aerospace Reports and as a member you’ll get discounted pricing and we can help get things set up. Likewise, if you’re working with another escrow company AOPA Finance can help coordinate that too. Plan on a deposit of 5%-10% of the aircraft's asking price.

    The letter of intent puts a clock on the deal, enables you to withdraw from it without penalty under certain conditions you and the seller negotiate, and establishes the parameters for the final price.

    This is also time to have your aviation attorney to draw up a detailed purchase agreement. If you don't have one, AOPA has a sample purchase agreement you can view here. You may want to consider signing up for Pilot Protection Services which includes consultation with an attorney regarding your purchase of an aircraft specific to your state and the legal requirements there. What it covers includes, but is not limited to, purchase amount, refund terms, deadlines for the process, representations and warranties, even the location of aircraft delivery.

    Notify Lender. The sooner you notify the lender, the sooner the lender can convert the pre-approval into an approval. Your lender will conduct background checks, damage history queries, etc. If the aircraft is missing logbooks, that may affect the stipulations of the pre-approval with the lender. Each has a set of tolerances for missing logbooks. Ask before you commit to a particular lender. AOPA Finance may be able to help.

    Pre-purchase Inspection. Even before you go to the airplane, have the logbooks sent to you. Nowadays, most sellers have their airframe and engine logbooks scanned into PDF format for ease of emailing. Get your mechanic started perusing those logs. You and your lender will want to know whether the logbooks are complete as soon as possible. An incomplete set can frequently impact the final price, and it may also affect the plane's insurability.

    In most instances, it's best that a mechanic other than the regular mechanic for that airplane perform the pre-purchase inspection. That may mean flying your assigned A&P to the airplane's location, with a hotel stay.

    International Registry. If your plane is subject to the Cape Town Treaty (see here for more info), you should begin the International Registry process simultaneously with contacting your escrow agent. It's complex and time-consuming and may affect the timing of your closing date. Subject to some exceptions, an aircraft must be registered with an appropriate aviation authority before it can be legally operated in any country. Suffice it to say, better to have your team of experts handle this checklist item.

    Insurance. As far as your lender is concerned, typically, they’ll require you to maintain full ground and flight insurance, as well as "Breach of Warranty Coverage" for the amount of the loan with a carrier acceptable to the lender.

    The lender must be named as "loss payee" and be protected by a "lien holder's endorsement." Once you have been placed with the appropriate lender, we will send you the specific insurance requirements for that lender.

    Title Search and Background Checks. Usually, this will be a straightforward process. If a plane has been in an incident, involved in an estate dispute or part of a bankruptcy, though, then things could get complicated. Your prospective insurer, your lender and your escrow agent may all play a part in these searches and checks. We've heard too many stories of airplane deals falling through at the last minute because of lack of due diligence by the buyer, so be thorough.

    All that complete, what's left is to take delivery. There's one last checklist to run—the Aircraft Delivery Checklist:

    • Punch List
    • Technical Acceptance
    • Escrow
    • Closing and Delivery

    Punch List. Here's where the due diligence of your title, escrow or insurance representatives pays off. They'll work with you to clear up any liens or estate claims. Similarly, the list of deficiencies and discrepancies your mechanic delivered will have been either rectified or negotiated into a lower price.

    Technical Acceptance. Once the Punch List is complete, the buyer then executes and delivers a Technical Acceptance Certificate to the seller. This says the buyer accepts the condition of the aircraft, subject to "no material damage and/or total loss affecting the aircraft upon or prior to arrival of the aircraft at the delivery location." The deposit usually becomes non-refundable at this stage.

    Escrow. The remaining purchase price is deposited into the escrow account, and the seller is paid.

    Closing and Delivery. The title is transferred and the aircraft is registered to the new owner, once the new owner insures it. Finally, the aircraft is turned over or delivered to you. Congratulations.

    Considering aircraft ownership? AOPA Aviation Finance will make your purchase experience as smooth as possible. For information about aircraft financing, please visit the website (www.aopafinance.com) or call 1-800-62-PLANE (75263).

    Click here for The Acquisition Checklist: Part One

    This article was originally published by AOPA Aviation Finance Company on March 5, 2019.

  • Tracey Cheek posted an article
    Preserving your anonymity as an Aircraft Owner in 2019 see more

    NAFA member Amanda Applegate, Partner with Aerlex Law Group, discusses how to preserve your anonymity as an aircraft owner.

    When an aircraft is bought or sold in the United States, two documents must be filed with the Federal Aviation Administration (“FAA”) – a bill of sale and registration application, which are both public records. Other documents may be required depending on the ownership structure and if financing is involved. On the registration application, the buyer must list the name of the purchasing entity, an address and a telephone number. The registration must also be signed by someone with signatory authority of the purchasing entity and that person’s name is also disclosed. On the bill of sale, the seller must list the purchasing entity’s name and address. This gives many aircraft owners or potential owners pause as they often do not want the public to know about their aircraft ownership or to have their address and telephone number revealed in public records and thus subject to solicitations.

    In order to preserve anonymity, several steps can be taken. First, the address listed on the bill of sale and registration application can be a “care of” address. This allows the buyer’s attorney, management company or authorized agent to receive mailings on their behalf. However, this can sometimes complicate the overflight exemption process, and care should be taken to weigh both of these issues prior to the selection of a particular address and/or phone number. Another alternative is to use a post office box for the bill of sale. However, the FAA insists upon a physical address for the registration application. In addition to requiring an address on the registration application, a telephone number must also be listed. Thoughtful consideration should be given as to which telephone number is listed, as this number will not only receive calls if there is an FAA issue, but will also be used by companies collecting data on the aircraft ownership, media in the event there is an issue with the aircraft or solicitations from management companies or brokers who are looking to generate business activity.

    Even if the address and telephone number are thoughtfully planned, the purchasing entity must be shown on both the registration application and the bill of sale. Often times, a special purpose company can be formed to own the aircraft. However, if this is the case, it is important to note that special purpose companies cannot operate the aircraft, and additional ownership and operating structure planning will be necessary. In the case of a limited liability company, the FAA registry requires that a statement in support of registration be filed. The statement must list who the managers and members of the limited liability company are and who has the authority to act on behalf of the company. If another limited liability company is a member or manager of the limited liability company, then a statement in support of registration must be filed for this limited liability company too, and so on, until the managers and members are other than limited liability companies. Statements in support of registration become part of the public record; therefore, forming a limited liability company for anonymity will not provide the protection sought. Interestingly, if the entity is a corporation, the FAA registry does not require a statement in support of registration. Accordingly, there is more anonymity in owning an aircraft under a corporation than a limited liability company. However, the tax implications and the liability risks should be weighed against the desire for anonymity.

    Additionally, a trust can be formed to own the aircraft. With the right trust structure, it is possible to protect anonymity inside of the trust arrangement. There are several trust companies frequently used when a purchasing entity and/or individual has issues with the FAA citizenship requirements. Some of these same trust companies can be used, if they offer the right structure, for anonymity purposes for aircraft ownership. It is important to understand what documents will be required to be filed with the FAA as part of the closing when the ownership is with the trust.

    Furthermore, if the purchasing entity properly preserves anonymity along with the address and phone number, it is also important to consider any financing documents that will be filed with the FAA registry in the event the purchase of the aircraft is being financed. Again, with proper thought and structure planning, these documents can use similar entities, address and phone number as the other documents filed.

    Finally, it is also important to consider what documents are going to be necessary and will be disclosed when the aircraft is put into service, either as Part 91 aircraft or a Part 135 aircraft.

    There is no easy way to protect your anonymity when owning an aircraft. But thoughtful planning can allow an owner more anonymity, fewer solicitations and less public scrutiny.

    Please contact Amanda Applegate at 310-392-5200 or aapplegate@aerlex.com.

    This article was written by Amanda Applegate with Aerlex Law Group and originally published in BusinessAir Magazine, March 2019, Volume 29, No. 3.