“Trust, but verify” is an old adage that was used famously by President Ronald Reagan during arms-control negotiations with the Soviet Union toward the end of the Cold War. In the context of aircraft transactions, it is worthwhile guidance.
Aircraft transactions are sometimes handled in a rather casual manner with the parties relying on verbal arrangements or inexact terms written on the back of a napkin. I’m all for depending on a person’s word and a trusting handshake for many things in life, but I think an airplane transaction demands a higher level of care, attention, and documentation. Following these basic tips will help to reduce the risks inherent in an aircraft transaction.
1. Execute a written agreement. It needn’t be a 30-page tome full of legalese to be effective. Its length and content should relate to the complexity of the transaction. At a minimum, the agreement should identify the aircraft; the parties to the transaction; and the agreed-upon terms such as price, inspection, and closing conditions. The terms, of course, are negotiable and should reflect a mutual understanding between the buyer and seller. AOPA has a Sample Aircraft Purchase/Sales Agreement posted on its website along with numerous other transaction-related resources. Also, Pilot Protection Services/Legal Services Plan members may utilize the benefits of the plan to consult with an attorney about the contract or other transactional matters.
2. Inspect the aircraft and verify equipment and records. It’s advisable to perform a thorough pre-purchase inspection. The inspector should not only assess the mechanical condition of the aircraft, but also scrutinize the log records and aircraft paperwork. It’s important, for instance, to verify that the registration mark on the airplane matches what’s listed in the logs and displayed on the registration and airworthiness certificates. Attention should also be paid to airframe and engine serial numbers. Also, don’t rely solely on the spec sheet; verify that the equipment listed is actually installed.
3. Conduct an FAA title search. Hire a title and escrow company to conduct the search to ensure the aircraft title is clear of recorded liens or encumbrances. It’s far better to discover a problem before a purchase than to try and fix it afterwards. If you’re financing the purchase, your lender will likely require a title search.
4. Consider an escrow closing. Having an independent title and escrow company orchestrate the closing will provide a professional level of oversight at a critical time and benefit both the buyer and seller. This might be of particular importance if you’re involved in a high dollar and/or complex transaction. The escrow agent will ensure that all the necessary documents and funds are in place; they will coordinate the closing and hand-deliver vital documents to the FAA.
These tips should help you avoid Cold War-like drama at closing (and beyond). Be prepared and fly away happy.