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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
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