Aircraft Title Search: A Comprehensive Guide

Purchasing an aircraft, whether it’s a small Cessna or a large Boeing, represents a significant investment. Just like buying a house or a car, ensuring clear title and understanding the aircraft’s history is paramount. An aircraft title search is the process of investigating the ownership records of an aircraft to uncover any liens, encumbrances, or other claims against the title. This comprehensive guide will walk you through the intricacies of aircraft title searches, explaining why they are crucial, the steps involved, and the resources available to assist you in navigating this complex process.

Why is an Aircraft Title Search Necessary?

An aircraft title search is not merely a suggestion; it is a critical component of due diligence before any aircraft transaction. Here’s why:

Protecting Your Investment

The primary reason to conduct a title search is to protect your investment. Imagine purchasing an aircraft only to discover later that it is subject to a substantial lien from a bank, a repair facility, or even the IRS. You could be held responsible for these debts, potentially losing the aircraft altogether. A title search reveals these hidden liabilities, allowing you to negotiate a price that reflects the true value of the aircraft, factoring in the outstanding debts or claims.

Verifying Ownership

The title search confirms that the seller legally owns the aircraft and has the right to transfer ownership. This is more than just checking the registration certificate. The FAA registry contains a record of ownership transfers and any recorded liens or encumbrances. However, the registration certificate itself is not proof of ownership; it merely indicates who is responsible for operating the aircraft. The true ownership lies in the FAA Aircraft Registry records.

Identifying Liens and Encumbrances

Liens and encumbrances represent financial claims against the aircraft. These can arise from various sources, including:

• Loans: Banks and other financial institutions often place liens on aircraft to secure loans used to purchase or refinance the aircraft.
• Repair Bills: Aviation maintenance facilities can place liens on an aircraft for unpaid repair bills.
• Unpaid Taxes: The IRS can place liens on an aircraft for unpaid federal taxes. State and local tax authorities can also impose liens for unpaid property taxes or sales taxes.
• Judgments: Court judgments can result in liens against an aircraft.
• Mechanics Liens: Similar to repair bills, mechanics liens can be placed by individuals or companies that performed work on the aircraft.

Failing to identify these liens can result in you inheriting these debts upon purchase.

Ensuring Clear Title Transfer

A clean title is essential for transferring ownership legally. If there are outstanding liens or encumbrances, the FAA may refuse to register the aircraft in your name until these issues are resolved. This can lead to significant delays and legal complications.

Avoiding Legal Disputes

A thorough title search can prevent future legal disputes. Discovering undisclosed liens or ownership claims after the purchase can lead to costly litigation. A clear title provides peace of mind and avoids potential legal headaches.

The Aircraft Title Search Process: A Step-by-Step Guide

Performing an aircraft title search involves several steps, each crucial for uncovering potential issues. While you can attempt to conduct the search yourself, engaging a reputable aviation title company is highly recommended. These companies have the expertise and resources to conduct a thorough search and interpret the complex legal documents.

Step 1: Obtain the N-Number

The first step is to obtain the aircraft’s N-number (registration number). This number is unique to each aircraft registered with the FAA and is essential for accessing the aircraft’s records. The N-number is typically found on the exterior of the aircraft and on the aircraft’s registration certificate.

Step 2: Search the FAA Aircraft Registry

The FAA maintains an online Aircraft Registry database that is accessible to the public. You can search this database using the N-number to obtain basic information about the aircraft, including the registered owner and the aircraft’s make and model. However, the online registry provides only a limited amount of information. It does not include detailed historical records or copies of recorded documents.

Step 3: Order an Aircraft Title Search Report

To obtain a comprehensive title search report, you will need to submit a request to the FAA Aircraft Registry in Oklahoma City. This request should specify the type of search you are requesting and include the aircraft’s N-number. There are generally two types of searches:

• Recordable Documents Search: This search provides copies of all documents recorded with the FAA that pertain to the aircraft, including bills of sale, security agreements (liens), releases of liens, and other legal documents.
• Chain of Title Search: This search traces the ownership history of the aircraft from its initial registration to the present day, providing a summary of all ownership transfers.

A reputable aviation title company can handle this process for you, expediting the search and ensuring that all relevant documents are obtained.

Step 4: Review and Analyze the Documents

Once you receive the title search report, you will need to carefully review and analyze the documents. This involves examining each document to identify any liens, encumbrances, or other claims against the aircraft. Pay close attention to:

• Bills of Sale: Verify that the chain of ownership is complete and unbroken. Look for any gaps in the ownership history.
• Security Agreements (Liens): Identify any outstanding liens and the amount of the debt secured by the lien. Determine the current status of the lien (e.g., active, released, satisfied).
• Releases of Liens: Ensure that any liens that have been paid off are properly released by the lienholder.
• Encumbrances: Look for any other encumbrances, such as leases or rights of way, that may affect the aircraft’s ownership or use.
• FAA Filings: Check for any discrepancies or irregularities in the FAA filings.

This step often requires legal expertise, as the documents can be complex and require interpretation of aviation law.

Step 5: Verify UCC Filings

In addition to the FAA Aircraft Registry, it’s also important to search the Uniform Commercial Code (UCC) filings in the state where the aircraft is based or where the seller is located. UCC filings provide notice of security interests in personal property, including aircraft. A UCC search can reveal liens that may not be recorded with the FAA.

Step 6: Obtain Title Insurance (Optional but Recommended)

Aircraft title insurance provides protection against losses arising from title defects, such as undisclosed liens or ownership claims. While it’s an additional cost, title insurance can provide peace of mind and protect you from significant financial losses if a title issue arises after the purchase. Several reputable companies specialize in aircraft title insurance.

Resources for Conducting an Aircraft Title Search

Several resources are available to assist you in conducting an aircraft title search:

Federal Aviation Administration (FAA) Aircraft Registry

The FAA Aircraft Registry is the primary source of information on aircraft ownership and liens. You can access the online registry to obtain basic information about an aircraft or submit a request for a comprehensive title search report. The FAA’s website provides information on the procedures for requesting a title search.

Aviation Title Companies

Aviation title companies specialize in conducting aircraft title searches and providing title insurance. These companies have the expertise and resources to conduct a thorough search and interpret the complex legal documents. They can also handle the process of obtaining title insurance. Some reputable aviation title companies include:

• AIC Title Service
• Aero-Space Reports
• Oklahoma City Abstract & Title Co.

Aviation Attorneys

Aviation attorneys can provide legal advice and assistance with aircraft title searches and transactions. They can review title search reports, interpret legal documents, and represent you in negotiations or legal disputes. A qualified aviation attorney can ensure that your interests are protected throughout the transaction.

Online Databases and Search Tools

Several online databases and search tools can assist you in gathering information about aircraft. These tools may provide information on aircraft ownership, accident history, and market values. However, it’s important to verify the accuracy of the information obtained from these sources.

Common Title Issues and How to Resolve Them

During an aircraft title search, you may encounter several common title issues. Here are some examples and how to resolve them:

Undisclosed Liens

If the title search reveals undisclosed liens, you will need to work with the seller to resolve these liens before closing the transaction. This may involve negotiating with the lienholder to obtain a release of the lien or paying off the debt secured by the lien. The purchase agreement should clearly state that the seller is responsible for resolving all outstanding liens before closing.

Incorrect or Incomplete Documentation

Sometimes, the title search may reveal errors or omissions in the recorded documents. For example, a bill of sale may be missing a signature or contain an incorrect N-number. In these cases, you will need to work with the seller to correct the documentation. This may involve obtaining a corrected bill of sale or submitting an affidavit to the FAA explaining the error.

Breaks in the Chain of Title

A break in the chain of title occurs when there is a gap in the ownership history of the aircraft. For example, a bill of sale may be missing, preventing you from tracing the ownership from one party to the next. Resolving a break in the chain of title can be challenging. You may need to conduct further research to locate the missing documentation or obtain a court order to establish ownership.

Conflicting Ownership Claims

In rare cases, the title search may reveal conflicting ownership claims. This occurs when two or more parties claim to own the same aircraft. Resolving conflicting ownership claims can be complex and may require litigation. It’s essential to consult with an aviation attorney to protect your interests.

Unreleased Liens

Even if a lien has been paid off, it’s crucial to ensure that the lienholder has filed a release of lien with the FAA. An unreleased lien can cloud the title and prevent you from transferring ownership. If the lienholder has failed to file a release, you will need to contact them and request that they do so. You may need to provide proof that the debt has been paid off.

Cost of an Aircraft Title Search

The cost of an aircraft title search can vary depending on several factors, including:

• The complexity of the search: A complex search involving multiple ownership transfers or liens will typically cost more than a simple search.
• The type of search: A comprehensive title search report, which includes copies of all recorded documents, will cost more than a basic search.
• The provider: Aviation title companies typically charge higher fees than conducting the search yourself, but they offer expertise and efficiency.
• Title insurance: The cost of title insurance will depend on the value of the aircraft and the amount of coverage.

Generally, you can expect to pay anywhere from several hundred dollars to several thousand dollars for an aircraft title search. Title insurance premiums are typically a percentage of the aircraft’s value.

Tips for a Successful Aircraft Title Search

Here are some tips to ensure a successful aircraft title search:

• Start Early: Begin the title search process as soon as possible after you have identified an aircraft that you are interested in purchasing. This will allow you ample time to resolve any title issues before closing.
• Engage a Reputable Title Company: A reputable aviation title company can provide expertise and efficiency in conducting the title search.
• Be Thorough: Don’t cut corners on the title search. Make sure that all relevant documents are reviewed and analyzed.
• Consult with an Aviation Attorney: An aviation attorney can provide legal advice and assistance throughout the transaction.
• Obtain Title Insurance: Title insurance provides protection against losses arising from title defects.
• Review the Purchase Agreement Carefully: The purchase agreement should clearly state the seller’s responsibility for resolving any title issues.
• Consider an Escrow Account: Using an escrow account can protect your funds during the transaction and ensure that all title issues are resolved before the funds are released to the seller.

The Future of Aircraft Title Searches

The aircraft title search process is constantly evolving, with new technologies and regulations impacting the industry. Here are some potential future trends:

Digitalization of Records

The FAA is working to digitize its aircraft registry records, which will make it easier and faster to access title information. This will streamline the title search process and reduce the time and cost involved.

Blockchain Technology

Blockchain technology has the potential to revolutionize the aircraft title search process by providing a secure and transparent platform for recording and tracking aircraft ownership. This could reduce the risk of fraud and improve the accuracy of title records.

Increased Automation

Automation is likely to play an increasingly important role in the aircraft title search process. Automated search tools can quickly identify potential title issues and streamline the review of documents.

Enhanced Data Analytics

Data analytics can be used to identify patterns and trends in aircraft title records, which can help to detect fraud and identify potential risks.

Conclusion

An aircraft title search is an essential part of any aircraft transaction. It protects your investment, verifies ownership, identifies liens and encumbrances, ensures clear title transfer, and avoids legal disputes. By understanding the process and utilizing the available resources, you can ensure a successful and secure aircraft purchase. While the process can seem daunting, engaging professionals and diligently following the steps outlined in this guide will provide the necessary assurance and protection for your valuable aviation asset. Remember that a small investment in due diligence upfront can save you significant headaches and financial losses down the road.