Aircraft Title and Escrow: Complete Guide for Buyers and Sellers

Understanding Aircraft Title and Ownership

Aircraft ownership in the United States is documented through the FAA Aircraft Registry in Oklahoma City. Unlike cars with physical titles issued by states, aircraft have:

• FAA Registration Certificate: Proof of registration showing registered owner
• Bill of Sale: Document transferring ownership from seller to buyer
• Chain of Title: Historical record of all previous owners and transfers
• Lien Records: Documentation of loans secured by the aircraft

The FAA Registry is public record. Anyone can search registration and lien information for any U.S.-registered aircraft. However, this system requires understanding to navigate correctly and identify potential problems.

What Is "Clear Title"?

Clear title means the seller legally owns the aircraft free of undisclosed liens, claims, or legal disputes. When purchasing, you want to verify:

• The seller is the registered owner
• No outstanding liens exist (or disclosed liens will be paid at closing)
• No legal judgments or claims affect the aircraft
• Previous title transfers were properly executed
• No gaps or irregularities exist in the ownership chain

Purchasing aircraft without clear title can result in losing both the aircraft and your money if someone with superior legal claim comes forward.

The Aircraft Title Search Process

Why Title Searches Are Essential

A professional title search examines FAA records to verify ownership and uncover any issues. Common problems discovered include:

• Existing liens from previous loans not yet released
• Judgments or legal claims against the aircraft
• Improper previous transfers creating ownership questions
• Seller not actually being the legal owner
• Outstanding tax liens
• Deceased owners requiring estate proceedings

Lenders universally require title searches before funding aircraft loans. Even cash buyers should conduct searches to protect their investment.

How Title Searches Work

Professional title companies or aviation attorneys conduct searches by:

1. Searching FAA Registry for current registration and ownership
2. Examining lien records for any recorded security interests
3. Reviewing chain of title back multiple transfers (often 10+ years)
4. Checking for proper execution of previous transfers
5. Identifying any irregularities, gaps, or concerns
6. Providing written report detailing findings

Title searches typically cost $300-$500 and take 3-7 business days. Rush services are available for additional fees.

Understanding Title Search Reports

A title search report typically includes:

• Current registered owner verification
• Registration status and expiration date
• All recorded liens (current and released)
• Chain of title showing previous owners
• Any irregularities or concerns
• Recommendations for clearing title issues

Review the report carefully with your attorney. Even minor irregularities can affect financeability or insurability.

Aircraft Escrow Services

What Is Aircraft Escrow?

Escrow is a neutral third-party service that holds funds and documents until all conditions are met, then executes the transaction simultaneously. The escrow agent:

• Holds buyer's purchase funds
• Receives and verifies all required documents
• Confirms satisfaction of all contingencies
• Files documents with the FAA
• Releases funds to seller only after proper transfer
• Ensures both parties fulfill their obligations

Benefits of Using Escrow

Escrow protects both buyers and sellers:

For Buyers:

• Funds aren't released until proper title transfer occurs
• Protection against seller taking money without transferring ownership
• Verification that liens are satisfied before purchase
• Professional handling of complex FAA paperwork
• Neutral party ensuring all conditions are met

For Sellers:

• Assurance that funds are available before transferring ownership
• Protection against buyers claiming transfer defects to avoid payment
• Professional document preparation ensuring valid transfer
• Immediate payment upon proper completion

How Aircraft Escrow Works

1. Open Escrow: Buyer and seller agree to use escrow and select an escrow agent (often specified in purchase agreement)
2. Deposit Funds: Buyer deposits purchase funds with escrow agent
3. Submit Documents: Seller provides bill of sale, registration, and other required documents
4. Title Search: Escrow agent orders title search to verify clear title
5. Lien Payoff: Any existing liens are paid from purchase funds or seller's separate payment
6. Document Verification: Escrow agent verifies all documents are complete and proper
7. FAA Filing: Documents are filed with FAA Registry
8. Fund Disbursement: Once proper filing is confirmed, funds are released to seller
9. Close Escrow: Transaction is complete; buyer receives temporary registration

Escrow Costs and Timeline

• Cost: Typically $500-$2,000 depending on transaction complexity
• Timeline: 1-3 weeks from opening escrow to closing, depending on document preparation and title search

Escrow fees are often split between buyer and seller, or one party agrees to pay as part of negotiations.

FAA Aircraft Registration Requirements

Required Documents for Registration

To register an aircraft with the FAA, you must submit:

• AC Form 8050-1 - Aircraft Registration Application: Completed by buyer with aircraft details and owner information
• AC Form 8050-2 - Bill of Sale: Signed by seller transferring ownership to buyer; must include purchase price
• Registration Fee: $5 registration fee (can be paid online or by check)
• Evidence of Ownership: Current registration or previous bill of sale proving seller's ownership

If the aircraft has liens being paid off, you also need:

• AC Form 8050-41 - Release of Lien: Signed by lienholder releasing their security interest

Completing the Bill of Sale (Form 8050-2)

The bill of sale must include:

• Aircraft make, model, and serial number
• FAA registration number (N-number)
• Seller's name and address exactly as shown on previous registration
• Buyer's name and address exactly as desired on new registration
• Purchase price (required even for gifts; use "gift" if applicable)
• Date of sale
• Seller's signature (must match registered owner name)

Errors on the bill of sale can delay processing for weeks. Have an aviation attorney or escrow agent review before submission.

Registration Application (Form 8050-1)

The buyer completes this form specifying:

• How ownership will be held (individual, LLC, corporation, partnership, trust)
• Owner name and address as it should appear on registration
• Citizenship verification (U.S. citizens or entities required for N-registration)
• Aircraft details
• Owner signature

Ownership Structures and Considerations

Aircraft can be registered to:

• Individual: Simplest option; aircraft registered in your name
• Co-Ownership: Multiple individuals as co-owners
• LLC: Limited liability company ownership (common for asset protection)
• Corporation: Corporate ownership
• Trust: Trust ownership (estate planning benefits)
• Partnership: Partnership entity ownership

Each structure has legal, tax, and liability implications. Consult with an attorney and tax advisor to determine the best option for your situation. Learn more about LLC ownership structures for aircraft.

Submitting Registration Documents

Documents can be submitted:

• By Mail: Send to FAA Aircraft Registration Branch in Oklahoma City
• In Person: Drop off at FAA offices in Oklahoma City
• Through Escrow Agent: Escrow services handle filing as part of their service

The FAA issues a pink copy (temporary certificate) immediately upon receipt, valid for 120 days. The permanent registration certificate is mailed 4-8 weeks later.

Lien Perfection and Release

What Is Lien Perfection?

When you finance an aircraft, your lender files a lien with the FAA to secure their interest. This "perfects" their security interest, making it public record and giving them legal claim if you default.

Lenders file liens using:

• AC Form 8050-98 - Aircraft Security Agreement: Details of the loan and security interest
• Conveyance Fee: $5 filing fee

Properly perfected liens protect lenders and inform potential buyers that the aircraft is encumbered.

Lien Release When Paying Off Loans

When you pay off an aircraft loan, the lender must file a lien release:

• Lender completes AC Form 8050-41 (Release of Lien)
• Form is filed with FAA Registry
• FAA updates records showing lien satisfaction

Always verify lien releases are filed. Some lenders delay filing or fail to file properly, causing problems when you later sell or refinance. Request written confirmation from the lender that the release was filed, and verify through the FAA registry.

Common Title and Escrow Problems

Existing Liens Not Released

Previous owners paid off loans but lenders never filed releases. The lien remains on record even though the debt is satisfied. Resolution requires:

• Contacting the lienholder for late release filing
• Providing proof of loan payoff
• Potentially involving attorneys if the lender no longer exists or won't cooperate

Breaks in Chain of Title

Missing transfers or improperly executed documents create gaps in ownership history. For example:

• Aircraft registered to Person A
• Person B has bill of sale from Person A but never registered it
• Person C (current seller) has bill of sale from Person B but can't prove Person B owned it

Resolution requires reconstructing proper chain of title, potentially requiring previous owners to execute corrective documents.

Seller Not Matching Registered Owner

The person selling the aircraft isn't the registered owner. This happens when:

• Aircraft was informally transferred without FAA registration
• Owner died and estate hasn't transferred ownership
• Company dissolved without transferring assets
• Name changes weren't updated with FAA

Don't purchase from sellers who can't prove legal ownership. This creates massive legal problems.

Tax Liens or Judgments

IRS liens, state tax liens, or court judgments against the aircraft must be satisfied before clear title transfer. These are often discovered during title searches.

Protecting Yourself as a Buyer

• Always conduct professional title searches even for seemingly simple transactions
• Use escrow services for any significant aircraft purchase
• Hire an aviation attorney to review documents and handle closing
• Verify seller identity matches registered owner exactly
• Don't accept verbal assurances about liens or ownership—verify everything
• Review purchase agreement carefully ensuring title contingencies protect you
• Get lien releases in writing from all lienholders at closing
• Keep copies of all documents for your records

After Registration: Ongoing Requirements

Registration Renewal

Aircraft registration must be renewed every three years. The FAA sends renewal notices to the registered address. Failure to renew results in registration cancellation, making the aircraft illegal to operate.

Address Changes

If you move, you must notify the FAA of your new address within 30 days. File AC Form 8050-1 with updated information.

Change of Ownership

When you eventually sell the aircraft, you'll go through this process from the seller's perspective. Maintain complete records of your ownership, liens, and lien releases to facilitate smooth future transfers.

Working With Aviation Professionals

Aviation Attorneys

Aviation attorneys specializing in aircraft transactions can:

• Review and draft purchase agreements
• Conduct or review title searches
• Prepare or review closing documents
• Resolve title problems
• Advise on ownership structures
• Handle FAA registration filing

Fees typically range from $500-$1,500 for straightforward transactions, more for complex situations.

Escrow Companies

Specialized aircraft escrow companies offer:

• Neutral fund holding
• Document preparation and review
• Title search coordination
• FAA filing services
• Lien payoff coordination
• Professional closing management

Well-known aircraft escrow companies include Aerospace Reports, AIC Title Service, and various aviation-specialized law firms offering escrow services.

The combination of professional title search, escrow services, and legal review typically costs $1,500-$3,500 total—a small price for protection on a six-figure purchase.