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Seller Is Unable To Convey Clear Title. In this situation, bill of sale may be valid and convey title to aircraft to aircraft buyer, but that aircraft may be subject to interests of some other third-party. Such prior interests can include judgment liens, tax liens, mechanic’s liens and various other liens and security interests. These prior interests would likely be recorded before buyer’s bill of sale. It is also possible, in some limited circumstances, to have an unrecorded, possessory lien against an aircraft. (Unrecorded, possessory liens make a strong case against purchasing an aircraft sight unseen without confirming location of aircraft and lack of claims by party in possession if other than aircraft seller).
What To Do? With such potential problems lurking in shadows, what can/should an aircraft buyer do? Well, one answer is to hire an aviation attorney to assist you with transaction. An aviation attorney will be familiar with filing and recording requirements of FAA and will make sure that bill of sale and aircraft registration application are completed accurately, properly and filed in a timely manner. An aviation attorney will also be able to perform due diligence on your behalf including a title search and name searches for seller to discover any judgments, liens, bankruptcies or security interests. He or she can also help you resolve any title defects that may be discovered during due diligence.
An aviation attorney may further help you obtain an affidavit from seller affirmatively stating that seller is not aware of any judgments, liens or encumbrances affecting title to aircraft. This may assist you in pursuing or asserting a fraud claim against seller if a title issue arises which you can show seller was aware of when affidavit was signed.
Another way to protect yourself is to buy title insurance for your aircraft. The aircraft title insurer will ensure your documentation is accurate and filed in a timely manner and it will also perform same types of title and name searches an aviation attorney would perform on your behalf. However, title insurer may or may not be able to assist you in resolving any title defects and won’t be able to provide you with any legal advice regarding purchase transaction.
The bottom line is that you as an aircraft buyer need to proceed with caution and perform due diligence when purchasing an aircraft. Although this may seem like added cost in short term, in long run these steps can save you large expense, and possible loss of your aircraft, that can result from title defects or third-party claims against your aircraft.
As always, fly safe and, when you are purchasing an aircraft, buy smart.
Greg is an aviation attorney and holds a commercial pilot certificate with instrument rating. His handles aviation litigation, including insurance matters and creditor’s rights, FAA certificate actions and aviation related transactional matters. He can be reached via e-mail at firstname.lastname@example.org or check out his website at www.aerolegalservices.com.