When an aircraft owner decides to sell their aircraft, timing and precision are critical. Failing to execute key preparatory steps at the appropriate stage of the transaction can lead to significant financial costs, delays, or legal defaults. This article outlines ten essential actions required to ensure a smooth and successful aircraft sale.
1. Aircraft Specification Sheet (Marketing Materials) When marketing the aircraft for sale, the specification sheet must be 100% accurate. Advertising an aircraft with certain options or equipment only to discover a misrepresentation during the sale process can lead to serious legal and financial implications, including seller default.
2. Loose Equipment List Establishing a definitive loose equipment list early in the process is vital. This equipment has value, and inventorying it in advance reduces the time required to finalize the sale agreement. Often, the loose equipment list is an exhibit to the sale agreement and failure to prepare it in advance can cause significant signing delays.
3. Aircraft Registration Number Many aircraft owners have aircraft registration numbers that are important and personal to them and want the registration number excluded from the aircraft sale. The best way to make sure a seller does not lose control of their registration number is to change it prior to closing. A seller can submit the request to change the registration number with the FAA, although it is important to keep in mind that it is currently taking over three months for the FAA registry to issue 8050-64 forms. Once the 8050-64 form is issued, the owner of the aircraft has up to 12 months to make the registration number change. The 8050-64 form can be obtained in advance of listing the aircraft for sale and the aircraft registration number can be changed during the inspection of the aircraft and/or during the repair of discrepancies. This allows sellers to maintain control of the registration number that is important to them. Failure to follow this process means that a seller must negotiate with the buyer to get the registration number back after the aircraft is sold, which sometimes can result in delays or even the loss of the registration number.
4. Service Contracts and Subscriptions All associated service contracts and subscriptions must be identified for transfer or termination. Sellers should pay close attention to prepaid annual subscriptions; knowing these dates allows for prepayments to be factored into the purchase price or reimbursed at closing. Additionally, if there are any early termination fees it may be best for a seller to only sell the aircraft to someone willing to continue on the service contracts or require the buyer under the sale agreement to pay any associated fees.
5. Title Search Prior to listing the aircraft for sale, the owner can obtain a title search on the airframe and engines for approximately $300. This identifies unexpected liens – such as tax, mechanics, or erroneous filings – that may have occurred during ownership. Any title work can be done while the aircraft is being marketed for sale so that when it is time to close on the transaction, the title is already clear or will be cleared. Failure to clear unexpected liens in advance of closing can delay closing or result in a default by seller if clear title cannot be conveyed.
6. Aircraft Document Inventory While a full aircraft records review may not always occur before marketing, records should be inventoried and organized. Making sure the records are complete and organized before a buyer commences its visual inspection allows buyers to feel confident that the aircraft was well maintained. It also allows the owner to find any missing records before the buyer discovers them during the pre-purchase inspection.
7. Know Your Aircraft When offers start rolling in for the aircraft, most offers will have a list of delivery conditions the aircraft must meet at closing. It is important to know the condition and history of the aircraft, including if there has been any damage history, if any systems are not working or no longer supported, or if there are any technical variations on the aircraft or engines. If any anomalies exist, they need to be carved out from the delivery conditions. Failure to do this means that the delivery conditions cannot be satisfied and could result in a seller default or rejection of the aircraft by the buyer and termination of the sale agreement. It is always best to know your aircraft and disclose any items necessary before signing the letter of intent to sell.
8. Logo Removal All logos from both the exterior and interior (including Airshow) should be removed. The seller should think about the best time to have this work done and make sure it is completed prior to closing. Failure to do this could mean the aircraft does not meet the delivery condition or worse, a logo is left on the aircraft, and the new buyer is involved in an accident or incident. This could have a negative impact to the seller’s image, which could have been avoidable.
9. Company Status If a sole purpose entity was created to hold title to the aircraft, a business search should be done on the secretary of state website where the selling entity is registered. The selling entity needs to be active and in good standing. If it is not, the selling entity will need to take steps to bring the entity back to an active and good standing status with the state of registration. A sale agreement should not be signed unless the entity is in good standing.
10. Loaner Equipment If there is any loaner equipment on the aircraft it should be disclosed as part of the sale process. For example, if an engine overhaul is taking place and a loaner engine is currently on the aircraft, arrangements need to be made with the service provider to transfer all agreements to the new owner as part of the sale process. This includes the maintenance contract and the bailment agreement for the loaner equipment. Failure to do this in advance of closing would result in a breach of the service contract and the loaner agreement. It could also mean that the loaner equipment is not properly insured, if the seller previously insured it.
Preparing to sell an aircraft should be done systematically and thoughtfully to make sure the aircraft is sold and there are no unintentional results from failure to properly plan.