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If I could meet every buyer before they start the aircraft acquisition process, I would give them the following advice: please put together a qualified, experienced purchasing team.

The first member of the team is the aviation attorney. A legal expert in aviation issues and transactions, the ideal aviation attorney can help structure the ownership with the least amount of risks and ensure compliance with federal aviation regulations. A knowledgeable aviation attorney will also provide thoughtful tax planning and review the often voluminous documents that govern all aspects of the acquisition. Most importantly, an experienced and qualified aviation attorney will provide resources to help assemble the rest of the experienced purchasing team.

Next is the aircraft broker. Many brokers specialize in certain types of aircraft; some choose to limit their services to representing buyers or sellers only. It is important to select a broker that knows and understands the market for the buyer’s preferred aircraft type and has years of experience analyzing that market and its trends. The broker must have outstanding connections to be able to fully search the global market and excellent resources to support the transaction, from aircraft selection to coordination of the pre-buy inspection.

If the buyer chooses to use a management company to handle aircraft operations after the closing, then select the RIGHT management company for the job. The management company should have experience with the aircraft type being purchased and must have exceptional safety standards and culture. Unlike the rest of the team members, the management company will be a partner long after the acquisition is completed, so stellar credentials and service are essential.

The lender (if the buyer is financing the purchase), insurance broker and escrow agent are also important members of the team. The ideal lender should have a strong aviation presence with various financing lease and loan options. The insurance broker ought to specialize in business aircraft insurance and be able to articulate the differences between the fleet policy of the management company and an individual policy and help the owner decide which policy is right for him or her. The escrow agent will handle all document processing and flow of funds. They must have flawless management of the documentation — there is nothing worse than a closing day where no closing occurs.

With the right team of experts, an often complicated and time-consuming transaction process can be simplified. The final result will be a well-informed, satisfied buyer with a well-priced, well-maintained aircraft that fits the specified mission.

First-time aircraft buyers looking at a potential acquisition may not realize that the registration number painted on the fuselage or vertical stabilizer of the aircraft can be changed and personalized by the new owner. “Tail numbers” – the name often used when referring to aircraft registration numbers – can be chosen by an owner in much the same way as a “vanity” license plate for an automobile. When selecting a registration number for a U. S. registered aircraft, the following rules apply:

An N-Number can be in any of these formats:

• One to five numbers (N12345)
• One to four numbers followed by one letter (N1234Z)
• One to three numbers followed by two letters (N123AZ)

N-Numbers do not have:

• A zero as the first number
• The letters “I” or “O”

In order to check the availability of a registration number, this website can be used. However, it is worth noting that reserving a registration number can be done online, in person at the Federal Aviation Administration (“FAA”) registry filing window or through the mail. Therefore, sometimes a registration number may appear available online when it is not actually available.

If the registration number is available, it can be reserved for a fee of $10.00. It is important to reserve the registration number under the name of the new owner or a relinquishment and reservation in the new name will have to take place later.

Once the registration number has been reserved, the FAA will send a written notice of confirmation of the reservation. If this confirmation has been received but the assignment has not yet been approved by the FAA, owners oftentimes will paint the new number on the aircraft but cover it with a decal reflecting the present registration number until such time as the change has been approved by the FAA.

Once the registration number is reserved, it must be assigned to the aircraft. If the change is being done at the time the aircraft is being purchased, it is best to submit the request for the registration number change with the documents filed for closing with the FAA civil aircraft registry. The letter requesting the registration number change should include the name of the aircraft manufacturer, model designation, serial number, and the current registration number.

When the FAA approves the registration number change, the agency will mail an AC Form 8050-64 to the owner. This is the Assignment of Special Registration Number
and authorizes the placement of the new registration number on the aircraft. Once the owner places the new registration number on the aircraft, the owner must do four things:

1. Within five days after the number is placed on the aircraft, the owner must complete and return the 8050-64 form showing the date the registration number was placed on the aircraft.
2. Within 10 days, the owner must take a copy of the 8050-64 form and the existing airworthiness certificate to a FAA Flight Standards District office (FSDO) to
obtain a revised airworthiness certificate.
3. The owner must carry a copy of the AC Form 8050-64 with the current Certificate of Aircraft Registration, AC Form 8050-3. These documents provide
temporary authority to operate the aircraft under the new N number until the replacement Certificate of Aircraft Registration is received.
4. The owner must notify the aircraft insurance provider of the registration change.

A seller who wishes to keep the registration number currently assigned to an aircraft that is being sold should make retention of that N number one of the terms of sale.
If the seller is going to retain the current registration number, then the parties need to determine, as part of their negotiations, which party will pay for the cost associated with the change. Additionally, some sellers may wish to establish a deadline on when the registration number will be assigned back to them. However, it is important to note that neither party controls how fast the FAA issues the 8050-64 form and, therefore, language should not obligate the parties to a timeline they cannot control. If a registration number change is being done in conjunction with a sale, it is best to file the request for the registration number change at the same time the closing transaction documents are filed with the FAA registry.

Creating a unique and special registration number for your aircraft can add a bit of fun to the ownership experience. However, the cost of the personalization must be properly allocated to the responsible party. Additionally, the timing of the change should be considered in order to avoid causing unnecessary complications in the closing of an aircraft acquisition.

Inventory for many aircraft type, especially those of newer vintage, is significantly lower than it has been in over a decade. Additionally, transaction volume has increased. As a result, as attractive and popular aircraft are listed for sale, sellers are receiving multiple offers almost immediately. We are very much in a Seller’s market. Many buyers are looking for aircraft and becoming increasingly frustrated that their desired aircraft is not available for sale and/or that when an aircraft is listed for sale that there are multiple competing offers. In today’s seller’s market, buyers and their representatives must avoid the race to the bottom and understand that the aircraft purchase process takes time. For example, establishing the ownership and operating structure for the aircraft takes time and the due diligence necessary on the aircraft prior to closing, such as the pre-purchase inspection and repair of discrepancies, takes time. Buyers must avoid skipping the necessary steps when acquiring an aircraft.

It is important to note that the establishment of the aircraft ownership and operating structure can be completed before the aircraft is sourced. Buyers who want to acquire an aircraft in 2021 should be putting the aircraft ownership and operating structure plan together with their aviation attorney and tax advisors now, so that when the aircraft is found there is no additional planning needed. An attempt to purchase an aircraft immediately and complete the ownership and operating structure plan after closing will not work and may trigger unnecessary taxes and regulatory compliance issues.

Similarly, if lender financing is planned for the aircraft acquisition, a lender should be selected and the financial information the lender will require should be gathered and submitted, so that all documents are already with the lender when the aircraft is selected. This will help the buyer avoid having to pay cash at closing and financing the purchase at a later date.

Additionally, if the buyer desires to engage a management company to manage the aircraft, various management companies can be vetted and a selection made prior to selecting the aircraft to be purchased. The management agreement can also be negotiated in advance of finding the aircraft, so that the parties can simply add the relevant and aircraft specific information to complete the management agreement once the aircraft is identified.

Furthermore, and most importantly, the due diligence on the aircraft being acquired should not be skipped. Preowned aircraft sales are on an “as, is, where, as” basis. As a result, in almost all cases it is not possible (except in the case of fraud) to go back to the seller after closing to remedy items found to be wrong with the aircraft. A pre-purchase inspection of the aircraft is necessary and while many sellers are limiting the scope of the inspections, buyers should seriously evaluate the scope and limitations of the inspection being made by the seller, as some items found after closing can render the aircraft inoperable for many months while repairs are done and parts are sourced. Moreover, in addition to the downtime, there can be significant costs associated with major repair work on aircraft.

In today’s headlines we are all reading about similar shortages in the housing market or perhaps experiencing it first hand while trying to buy or sell a house. We are also hearing stories of home buyers who did not inspect or even see a house prior to the acquisition of the house. As tempting as this path may be for a buyer eager to purchase an aircraft, this must be avoided in the used aircraft market. Buyers should not give up doing the necessary inspections on the aircraft to confirm the aircraft is airworthy, is in the condition as represented by seller, and meets the needs of the buyer. I say all this as a reminder that eventually the buyer will be a seller and when that time comes, it may not be a seller’s market.

In all types of transactions, you run into the phrase “time kills deals” and I actually believe that can be the case with aircraft purchases, especially when there is limited inventory, such as we are facing in certain aircraft categories in 2021. When it takes weeks to draft an initial purchase agreement or return comments on a purchase agreement, those avoidable delays can impact the success of an aircraft purchase. But lately I have encountered what I consider to be artificial deadlines that put unnecessary pressures on aspects of the Aircraft purchase process.

In a typical aircraft purchase transaction, after the purchase agreement is executed by the parties, the Aircraft is moved to an inspection facility and undergoes a pre-purchase inspection, the scope of which the parties have usually already agreed upon. However, neither party really knows with absolute certainty how long the inspection is going to take nor what is going to be found during the inspection and thereafter, how long the correction of discrepancies will take. Recently, during purchase agreement negotiations, I was asked to state that the inspection would not take longer than 7 days. As long as the parties agree on the scope of the inspection prior to the start of the inspection, I don’t understand or accept why the purchaser would or could possibly commit to the amount of time the inspection will take. While there is an estimated number of days from the inspection facility but the purchaser does not control the schedule of the inspection facility or its workers.

Additionally, I have been asked to establish a hard closing date by which time the transaction must close. Depending on the date selected, this can be reasonable as the parties don’t want to be committed to a transaction for numerous months, but again it must be done in a way that the purchaser is not obligated to commit to a process and timeline that is outside of their control. Neither the purchaser nor the seller know at the time the purchase agreement is executed what discrepancies will be found or how long it will take to repair the discrepancies in order to return the aircraft to service. If there is a hard closing date established by the parties that can’t be achieved once the process has started (through no fault of either party), then either the agreement will terminate or the parties will have to agree to amend the purchase agreement.

Finally, more and more frequently, I have been seeing many purchasers enter into an agreement to purchase an aircraft and start planning to use the aircraft for a specific flight planned in the future. This creates an unnecessary stress on the aircraft purchase process. Because of this self-imposed deadline, the purchaser may be willing to accept the aircraft and take delivery of it before all of the inspections that should be done to confirm the condition of the aircraft are completed or elect not to have all of the discrepancies fixed prior to close (if they are not airworthiness items).  While such decision may be satisfying in the short term in order to be able to use the new aircraft for the planned flight, the costs associated with such decision to close early, could end up being substantial.

Generally speaking, it is important that both parties are committed to closing the transaction as quickly as possible. However, forcing specific dates into an uncertain process simply adds unnecessary stress, possible defaults and pressure to accept an aircraft in a condition that is less than required by the purchase agreement. At the start of the process the parties, particularly the purchaser, should understand that there are variables in the process which cannot be predicted. The purchase timeline is fluid and an unwillingness to allow the process