When Bad Things Happen To Good Aircraft Buyers: Recognizing And Avoiding Aircraft Title Problems
By Gregory J. Reigel
© 2004 All rights reserved.
Whether you are purchasing your first aircraft or latest in a succession of aircraft, as an aircraft buyer you need to proceed with caution. If you donít, after seller has left with your money, you may have unanswered questions: Do I really own aircraft? Have I missed any skeletons hiding in closet that threaten my continued ownership and possession of my aircraft? What happens when someone else claims they own or have a prior interest in my aircraft?
To answer these questions, first we need to discuss what FAA requires for an aircraft purchase transaction. Then we will talk about some of problems/issues that an unwary buyer could face. Finally, we will address some of steps an aircraft buyer can take to ensure that he or she will be legitimate and undisputed owner of aircraft being purchased.
Recording Purchase Transactions With The FAA. When you purchase an aircraft, you receive an FAA Form 8050-2, Aircraft Bill of Sale showing transfer/sale of aircraft from seller to you, aircraft buyer. The bill of sale must then be recorded with FAA along with an FAA Form 8050-1, Aircraft Registration Application. (Unfortunately, Form 8050-1 is not available online, but must be obtained directly from FAA or your local FSDO). Additionally, for most part, all interests in aircraft, whether a security interest, lien, mortgage or judgment, must also be recorded with FAA Registry in Oklahoma City in order to be valid and first recorded interest usually has priority over interests recorded at a later date.
Failure to timely and properly comply with these filing and recording requirements can result in problems for aircraft buyer. What types of problems can happen? Although a variety of such problems exist, two specific ways in which an aircraft buyer can find himself or herself in trouble are when a seller fails to convey title to buyer or when a seller fails to convey "clear" title to buyer.
Seller Fails To Convey Title. In this situation, aircraft buyer does not become actual owner of aircraft. The seller may not necessarily intend for aircraft buyer not to take title to aircraft. Rather, sellerís failure to convey title to aircraft buyer is inadvertent or unknowing. One such situation occurs when bill of sale contains errors. Potential errors can include when person signing bill of sale does not have authority to sign on behalf of corporation or limited liability company that owns aircraft, when aircraft is incorrectly identified on bill of sale or when person signing bill of sale does not have capacity (e.g. a person signing bill of sale is a minor, mentally insane or incompetent).
Unfortunately, situations also arise in which sellerís actions are intentional and result in aircraft buyer not receiving title to aircraft. This can happen when a seller sells an aircraft twice and second buyer actually records his or her bill of sale before first buyer. A similar result occurs if seller forges bill of sale or if aircraft is subject to judicial proceedings (such as bankruptcy, receivership, probate, conservatorship or dissolution of marriage), and court has not authorized sale.