Jay Mesinger

Questions & Answers

June 14, 2006:

Q: I am buying a used aircraft. The seller insists that since it is used and has no warranties, all he needs to provide me with is a warranty bill of sale, rather than a full contract. Any thoughts?

A: Technically, just a handshake will do. The purchase agreement is not a document needed to transfer ownership, register the aircraft or legitimize the sale. It is, however, critically important and should not be minimized. Yes, the seller is correct, there are no warranties that the seller will provide except clear title and yes, the warranty bill of sale can declare that. However, there are many items that should be covered in a purchase contract to protect both sides. In fact, it is a road map of the deal, and more importantly, it is a road map to conflict resolution. A contract will dictate to the title company the terms of the deposit, and it will create a path to follow for the aircraft inspection, discrepancy identification and rectification. The agreement will set timetables and outline default consequences. Additionally, it is important in the legitimization of tax strategies like a 1031 exchange.

The purchase agreement does not have to be measured by its weight nor is it a bad one if it is short and sweet. I always suggest that an aviation attorney be retained to partner with you through this contracting phase. In fact, I suggest that the attorney be engaged from the outset, even in creating the original offer document. This early partnership will ensure that the offer used can in fact be blended into the contract. Often, the offer letter, if poorly written or not incorporating the necessary deal points, can cause the contract to look like a different deal than the offer. This can cause hard feelings between the buyer and the seller and create deal hardships. Don't eliminate the handshake but also have a solid contract even when buying a used aircraft.

Q: I tried to register with Cape Town myself. It was really cumbersome and difficult. Is there an easier way? Is it really necessary and does it eliminate the need for the old registration certificate?

A: I will admit it can be confusing to understand all of the intricacies of electronic filing with Cape Town. It is law, however, and it is here to stay. In fact, not just buyers are required to register with Cape Town, sellers must file as well. To handle this process I have begun referring all of my clients, both buyers and sellers, to use the title company that has been hired to hold the deposit. They all have a fee for this - part of the fee gets passed along to the Cape Town registry and part of the fee goes to the title company to handle it. It ranges from $400 to $600 per side, but it takes all the guesswork out of it and seems to make it happen quicker. All that is needed for them to proceed is a power of attorney that the title company can provide for you to sign, and a credit card authorization for the fee. Believe me, it is worth the fee! The FAA registration form that has always been used in the past is still needed so as to register the aircraft on the FAA registry. All those same steps still apply. The pink slip goes into the plane and serves as the temporary certificate until they mail you the hard copy. You will need to apply for an International Declaration of Operations if you are planning to fly out of the country, which the FAA can issue in about 48 hours. It should be applied for at closing, and again, the title company can handle this.

- Jay Mesinger