Registering in Trust – Why Bother with a Title Search beforehand?

Registering in trust is when an aircraft trust is set up to give the airplane ownership to a trustee who meets the FAA registration requirements on behalf of the true owner.

We often receive pressing and important phone calls from potential clients that require a direct response – this month’s topic stems from exactly that, with an urgent call from a man about to board a plane to Nashville, going to buy a plane from a guy he had never met.

He was experiencing cold feet, wondering if the man he was about to meet really owned the plane, had the right to sell it, or owed any money on it. So, we asked him, “Have you ever had a title search done on the aircraft?” and he said, “No, should I have?”

The number of deals done on a handshake in the aviation industry is amazing. No one would ever think of buying real estate like that, but it happens in aviation more often than one might think, particularly in the smaller aircraft market where buyers are more reluctant to spend extra money on items like title searches, escrow fees and legal advice.  

There are huge benefits to one of the most basic services in an aviation transaction – a search of the FAA records. Better known as a title search, this service can provide a buyer, or owner in trust, with valuable information about the aircraft. For less than $100 (in most cases), buyers can find out the name of the registered owner of the aircraft and whether a bank or any other entity has an outstanding interest against the aircraft. 

Taking the story above as an example, what if the “seller” of the aircraft didn’t really own it?  What if he had stolen it from someone else who owed the bank $50,000 for that plane? What would have happened to the buyer when the seller and bank realized the plane was no longer theirs? Think it sounds farfetched? Think again. 

Philko vs. Shacket is a landmark aviation case in which an unscrupulous seller sold the same plane to two separate buyers. As much as we don’t want to admit it, dishonest people exist in this world, and some of them have been known to sell unsuspecting buyers planes they don’t own or have the right to sell. A simple search of the FAA records can help prevent this from happening.

This unfortunate scenario aside, searching the FAA records before buying a plane can also help prevent title issues on down the line that can result in a plane being grounded. The FAA has strict rules about how documents being filed need to look. The seller’s name has to match the FAA records, only certain titles under signatures are acceptable, there are boxes to check for buyers, and lenders need help releasing outstanding loans or filing new ones.

When registering in trust, if any documents are not properly filled out when filed, the FAA could refuse to record them, causing problems for a buyer, or owner trustee, on down the line. It is then strongly in the best interest of all parties involved in an aircraft trust to first have a title search done – so no one is at risk. In fact, it is our policy to search FAA records and clear up any issues before registering a client in trust.