A straight-forward Sale & Purchase Agreement under an acceptable jurisdiction is used to effect the purchase.
Key elements are transfer of clear title of the agreed aircraft and its identified engines and APU, in an agreed condition, for an agreed price, on an agreed date, and the proper release of any liens or charges.
The transaction closing will be subject to the prior completion of a full and detailed survey of the aircraft, its engines and associated records to the buyer’s satisfaction.
The price negotiated may include certain rectification work. The Sale & Purchase Agreement will require verification of the aircraft’s advertised status and an interrogation of records and the final price may then be renegotiated in the light of the resulting inspection report which will identify any material discrepancies.
A procedure for then accepting the condition of the aircraft at delivery, either ‘as is’ or with certain corrective actions performed, must be established and documented.
Charges and liens can accrue from past financing, but also from maintenance and repair, unpaid airport charges and navigation fees. Engines may also be owned or leased separately or be subject to further charges from different parties.
A title search is conducted by searching the relevant mortgage registers. In some countries, including in particular the United States, specialist bonded title search agencies are retained for the purpose. The International Register, based on the Cape Town Treaty and now ratified by many countries, allows additional searches.
Dates may be of the essence. A certificate of airworthiness for export may be required along with formal de-registration. Certain programmes may have to evidenced as fully paid up to date. Delivery location may impact on customs procedures and sales and other taxes. Insurance arrangements, particularly a documented time for transfer of risk, must also be clear.
Documentation effecting a transfer of title and funds for the purchase are normally handled under an escrow arrangement in order to properly protect all parties in a transaction. Following execution of a Sale & Purchase Agreement, a known and insured bonded escrow agent is mutually agreed. Escrow fees are normally split between the parties. Seller will lodge registration and bill of sale with the escrow agent and creditors and lien holders will lodge discharges subject to payment from completion proceeds. Buyer will typically first lodge a (fully refundable) deposit with the escrow agent, binding the transaction and withdrawing the aircraft from the market, thereafter, following a pre-purchase inspection, either being returned or becoming a non-refundable deposit against the agreed price. Completion will then be scheduled to occur against a balance of the purchase price and effective delivery.
A number of arrangements need to be put in place simultaneously with a physical acceptance and delivery, including finance documentation, further verification, aircraft registration in the chosen jurisdiction, insurance (comprising hull, war risk and third-party liability), data plates, valid certificate of airworthiness (which requires a further physical survey by the new registry), crew licences or validations allowing the operation of the specific aircraft, designated airspace approvals, certain manuals and a number of aircraft document and navigation database subscriptions. There may also be a transfer of remaining warranties, maintenance and parts programmes. The process is coordinated in advance so as to be seamless and timely, allowing for a quick and smooth entry-into-service with the new owner. We are happy to advise and assist with each of these requirements.