Experience with the FAA Title CD / Interpreting the Registration Documents?

[AlexLev]

Hey -- so I signed a prepurchase agreement for a Mooney M20G (my first plane!) and one of the stipulations is that the title is free of encumbrances, liens, etc. I just flew the airplane in for a prebuy/annual yesterday.

About 10 days ago, I ordered from the FAA all the aircraft records they have on file on CD. The airworthiness part looks great with all appropriate STCs filed with the FAA. The registration is a bit confusing, now granted I'm not entirely sure on how to interpret it.

When the owner purchased it, there was an Aircraft Security Agreement filed (https://www.faa.gov/forms/index.cfm/go/document.information/documentID/186165)...about 5 years later, there was an "Assignment to Aircraft Security Filed" where the assignor from one bank maybe gives the security as the assignee to another bank?

The quote is:

Quote

 "Assignor hereby authorizes the Assignee's to do every act and thing necessary to collect and discharge the same. The Assignor warrants and agrees to defend the title of said aircraft hereby conveyed against all lawful claims and demands except the rights of the maker. The Assignor warrants that is the owner of a valid secrutiy interest in the said aircraft."

There is no other paperwork afterward except for renewal of registration, change of address, etc. Does that mean there is a lien on the airplane as far as the FAA is concerned? Anyone have any experience with this? A broker is selling the airplane for the owner (who is a fellow Mooneyspace member!) because he is deployed overseas.

Any help with this would be appreciated -- or would you suggest contacting a title company and seeing what professional help they can offer? If so, any references are also appreciated!

Thanks!

 

Edited November 12, 2016 by AlexLev

[carusoam]

Congrats, Alex, I think...

1) See if one of our legal guys can answer this one.  Stand by...

2) AOPA has a legal group for a small fee that can probably answer that question.

Some ideas that come to mind...

Best regards,

-a-

[Bravoman]

I am an attorney but this kind of thing is not what I do. Was this assignment doc you're referring to a blank form perhaps part of the main security agreement? Was there any assignee actually specified? There is certainly the possibility that it is part of a document comprising the security agreement but not actually utilized to make an assignment by the secured party. I think Anthony's suggestion is a good one  that you check with counsel who does this stuff  who can look at the docs for you and give you an informed opinion. 

[Jerry Pressley]

do a simple title search but aopa is very expensive compared with others.  faa website has a list

 

[AlexLev]

10 hours ago, Bravoman said:

I am an attorney but this kind of thing is not what I do. Was this assignment doc you're referring to a blank form perhaps part of the main security agreement? Was there any assignee actually specified? There is certainly the possibility that it is part of a document comprising the security agreement but not actually utilized to make an assignment by the secured party. I think Anthony's suggestion is a good one  that you check with counsel who does this stuff  who can look at the docs for you and give you an informed opinion. 

Yes, there was a bank as the assignee assigned with the assignor being another bank. Is it current that the lien was assigned than to another bank?

I called the broker today who is selling the plane. He said the owner may still owe a small bit of money on it (5K or so) but that will paid off with the final sale and I will get a clear title.

I will also call the bank on Monday to confirm details and make sure I get the necessary paperwork over to the FAA to confirm the airplane is not tied up with a bank security.

If anyone has any other advice, let me know.

[Two Oh One]

On November 12, 2016 at 11:14 AM, AlexLev said:

Yes, there was a bank as the assignee assigned with the assignor being another bank. Is it current (correct?) that the lien was assigned than to another bank?

Yes...

I called the broker today who is selling the plane. He said the owner may still owe a small bit of money on it (5K or so) but that will paid off with the final sale and I will get a clear title.

So then your above conclusion makes sense.  If the current owner owes $5K on the plane, the bank would still have a lien.

I will also call the bank on Monday to confirm details and make sure I get the necessary paperwork over to the FAA to confirm the airplane is not tied up with a bank security.

The bank won't let their interest go until the loan is paid off (obviously!!), so the debtor (current owner hopefully) needs to pay it off and probably file that particular bank's version of a "Request For Lien Release" (or similar). Once the loan is paid off and the lien release process is started with the bank, the assignee (bank) will file papers, likely a Form 8050-41, with the FAA releasing the lien.  As you dig through the plane's history on that CD-ROM, you should see similar forms for any other lien that was ever filed on the plane.

The FAA also needs the transfer forms (8050-2) conveying ownership from the previous registered owner to you.  If everything is done right, you'll get the plane in your name, free of liens.

If anyone has any other advice, let me know.

Depending on the value of the plane, your level of comfort in dealing with all of this, etc, you may be well served to use a title/escrow service to complete the sale.  They charge a fee (probably at least a few hundred), but they deal with this stuff day in day out.

Good luck, and enjoy the Mooney!!

 

Edited November 14, 2016 by Two Oh One
Font looked weird on iPad!

[midlifeflyer]

I'm very familiar with this stuff but can't comment with any certainty without seeing the paperwork in full. But, yeah,  it sounds like a simple assignment of a security interest to another bank, perhaps arising out of a sale or merger. And, unless there is a discharge by an appropriate party, the lien still exists until paid off.

Advice: ESPECIALLY  If there is an outstanding lien that needs to be paid off with the sale proceeds, you really should use a title/escrow service. "Comfort" is BS. Title/escrow companies are in the business of reading these records, understanding what is there, and making sure the sale proceeds clear liens. "Comfort" today doesn't hep much if you pay for an airplane and find later you still need to pay the bank after the sale is completed.

[AlexLev]

Thanks for all the advice! I contacted Dixie Aire and will be looking to work with them.

[bradp]

I used Mary Butler at AIC title for both title search and escrow services.  Seemless - I was a happy customer.  One everything was set up it took a single phone call to complete the transaction.  

[Bravoman]

+1 for AIC. Have used them I think three times. Top notch service.