NAFA member, Amanda Applegate, Partner at Aerlex Law Group discusses taking the necessary steps in the aircraft escrow closing process.
When closing an aircraft transaction, just like any other major purchase, an escrow agent should be used to hold documents and funds until both parties are ready to close. Because the FAA Registry is located in Oklahoma City, the escrow agents used for closing aircraft transactions are also in Oklahoma City. The FAA Registry has a filing window (although it has been closed with COVID precautions and is now currently just a filing bin) where the closing documents, including, the FAA Bill of Sale, FAA Registration Application, lender documents, and other relevant documents can be filed by the escrow agent as part of the aircraft closing process. The escrow agent will also hold and release upon closing non-FAA closing documents, such as the warranty bill of sale, assignment of warranties, and delivery receipt.
In addition to filing the documents with the FAA Registry, the escrow agent also handles the title searches at both the FAA Registry and on the International Registry. The title searches should be run immediately upon receipt of the deposit into escrow so that if there are any title issues they can be resolved so that the issues don’t impact the closing timeline. Finally, the escrow agent handles the funds associated with the closing. Typically, a letter of intent is signed and a deposit is required under the letter of intent. Then the purchase agreement is executed which outlines the terms of the sale, including the payment terms. The escrow agent receives a copy of the purchase agreement which should outline the closing process and distribution of funds process.
This Aerlex Law Group article was originally published in BusinessAir Magazine, April 2021, Volume 31, No. 4.
