Once over of purchase agreement?

[J0nathan225]

Hello, 

Haven't posted in awhile after the sell of 12Q, but I'm missing mooney flights and looking to purchase another. Can anyone review this and let me know what you think?

Seems odd this: "Seller warrants that Seller holds legal title to the Aircraft and that title will be transferred to Buyer free and clear of any liens, claims, charges, or encumbrances"  isn't really stated?

 

The undersigned Mr. Jonathan Davis (hereinafter “Buyer”) does hereby purchase from the________insert LLC owning the plane_____ (hereinafter “Seller”), with a registered address of__________________the following airplane and/or equipment, at the following prices and on the following terms, for which Buyer agrees to pay to Sellers.  Aircraft Description: 1964 1964 Mooney M20E Super 21 Reg: Nxxxxx S/N:xxx Aircraft Price: $TDB (All taxes and transfer fees are the responsibility of Buyer)

 Proposed Closing Date: 8-8-2019 Refundable Deposit: $5,000 Terms and Conditions:

1. The aircraft shall be sold to the Buyer for the price stated above, in an airworthy and flyable condition according to the approved plans and design for the aircraft year, make, and model, and with a valid and current annual (or 100 hour) inspection, and valid and current FAA registration. After the sale closes, possession will be transferred from the sellers to the buyer at ___________ Airport (KXXX) in XXXXX, XXXX, USA, on a date to be determined.

 2. Sellers represent and warrant that the Aircraft is free of all known damage history (other than any which may be already reflected in the logs) and that the logbooks and maintenance records, which will be delivered along with the Aircraft, are correct, complete and original, except where otherwise represented. All stated engine and airframe times are estimates and are subject to verification by the Buyer.

 3. Sellers warrant that the Aircraft will be free and clear of all outstanding financial obligations, liens, and encumbrances at the time of Closing. The Buyer may elect, at its own expense, to conduct an aircraft title search (either independently or as part of the escrow process) and will report the findings to the Sellers. If the title search indicates an unfavorable result, the Buyer may cancel the sale after notice given to the Sellers.

4. The Aircraft is and shall remain as presently equipped as is stated in the Aircraft as Equipped Addendum, listed below. No other future modifications or additions will be made to the aircraft equipment.  

5. The Buyer or its agent shall have the right to conduct a physical inspection of the Aircraft, at Buyer's expense, by an FAA certified mechanic or shop, at a reasonable location at or where the aircraft is normally based, within seven days after the signing of this agreement. The Buyer shall also be given an opportunity for a test flight in the Aircraft conducted by the Buyer or its Agent who is a qualified pilot, and which will be done entirely at the Sellers' expense. An inspection can also be made of the original logs and papers of the Aircraft. Any objections or exceptions to the condition of the Aircraft will be submitted by Buyer to the Sellers within no more than one business day after the Buyer has received the inspection report. Thereafter the Buyer may either accept the Aircraft in its "as-is/where-is" condition, reject the Aircraft by giving written notice to the Sellers, or request that the Sellers complete certain repairs impacting on airworthiness of the Aircraft. Upon such request, the Sellers shall have the option to either complete the airworthiness repairs, offer a credit in the purchase price to the Buyer or choose not to complete the repairs solely at the Sellers' option. In the event the Sellers do not choose to complete the repairs, or the Parties cannot come to an agreement of a credit towards the purchase price, then, in that event, the Buyer hall have the option of terminating the Contract and receiving back its deposit.

6. The Buyer agrees to pay a fully refundable deposit toward the aircraft purchase price to the Escrowing Agency, named below, via bank wire transfer within 2 days of the date the escrow is opened. If the aircraft closes, the Buyer will pay the final agreed upon selling price and the Buyers' share of closing costs, minus the deposit amount, by wire transfer, unless otherwise agreed to by the parties. All payments made by the Buyers shall be made in a timely manner.

7. The Buyer’s Agent shall open an escrow account with AEROtitle, 1200 Metropolitan Avenue, Oklahoma City, Oklahoma 73108, Phone: (405) 763-5980, as soon as practicable after the signing of this agreement by both parties. The Escrowing Agent shall, among other things, conduct a title search and will report the results of the search to the Buyer and Sellers. The Escrowing Agent shall hold all sale proceeds paid by the Buyer in Trust until the time of closing, when the proceeds shall be transferred to the Sellers, according to the parties’ written closing authority and disbursement instructions. The Escrowing Agent shall also act as the Legal Agent for both Parties for all ownership transfer and registration documents with the FAA. It is agreed that the Buyer and the Sellers shall equally pay all costs associated with this sale ($350.00) 50/50. In the event the sale fails to close, the Buyer shall be responsible for paying the cancellation costs to the Escrow Company.

 8. At the time of closing, the Sellers will transfer ownership of the Aircraft to the Buyer under the terms hereof. At a reasonable time before the Closing Date, the Sellers will sign and send to the Escrowing Agent, all appropriate documents to transfer ownership, including an original, signed in ink, or electronically signed FAA Bill of Sale (Form AC Form 8050-2), the signed Registration Certificate (“post card”) (Form AC Form 8050-3) from the Aircraft, and the Escrowing Agent’s Closing Instructions and Authorization Form. The Buyer will send the following documents to the Escrowing Agent, at a reasonable time prior to the Closing Date, an original, signed in ink (or electronically signed), FAA Registration Application (Form AC 8050-1) and a copy of the signed Purchase and Sale Agreement. When closing occurs, the Escrowing Agent will file all finalized ownership transfer paperwork with the FAA and will cause the purchase proceeds to be transferred to the Sellers via bank wire transfer.

9. The Closing Date may come before the Date of Delivery, and if that occurs, Sellers shall bear all risk of loss of or damage to the Aircraft between the date hereof and the actual Closing Date. Buyer expressly assumes all risks of loss or damage to the Aircraft after the Date of Closing.

10. The Buyer agrees that he will pay any and any applicable all local, county, state, and/or Federal sales tax, registration tax, excise tax, etc., for the purchase of this Aircraft. Buyer will agree to pay the said taxes within a reasonable time to the applicable and appropriate taxing authority after execution of this agreement.

11. This Agreement and its terms are the complete and total agreement of the parties. It shall be governed by the laws of the State of XXXXX as effective and in force on the date of this Agreement.

12. Parties furthermore agree, that in all terms and aspects of this contract, that time is of the essence. The Parties will therefore make best efforts to close this sale on or about 8/8/2019.

[M20F]

Insanity will ensue but my advice is if you need legal advice, don’t get it on the internet. 

[INA201]

"Sellers represent and warrant that the Aircraft is free of all known damage history"

It can never be free of any history ie ownership, damage, etc.   Once it has been damaged it cannot be free from the history of it.  The plane can be appropriately repaired from the damage.  It can never be free from the history of the damage or the repair history.  Now if the damage history is not "known damage history," but unknown damage history then we go back to the whole prebuy thing to try and make sure there was no undocumented damage history. 

Maybe it should say

Seller has fully represented all known damage history and repairs appropriate to the damage which ocurred.

 

I aint no lawyer so please use this information "knowingly" or "unknowingly" at your own discretion.

[drapo]

I bought my M20E 10 years ago from a gentleman in upstate New York. Contract stated that the aircraft was free of lien and the seller confirmed it, but it ended up having an old one dating back from the 70"s. The then owner borrowed money to overhaul the engine and the following buyers didn't use financing so the lien never came up. Since I was importing the aircraft to Canada, it needed to be clear of all lien to be imported and registered here. After a couple of months of research, the seller was finally able to trace and correct the lien. So, my advice, even if the seller tells you there is no lien on the aircraft, spend the $500, just to make sure!

[jaylw314]

42 minutes ago, drapo said:

I bought my M20E 10 years ago from a gentleman in upstate New York. Contract stated that the aircraft was free of lien and the seller confirmed it, but it ended up having an old one dating back from the 70"s. The then owner borrowed money to overhaul the engine and the following buyers didn't use financing so the lien never came up. Since I was importing the aircraft to Canada, it needed to be clear of all lien to be imported and registered here. After a couple of months of research, the seller was finally able to trace and correct the lien. So, my advice, even if the seller tells you there is no lien on the aircraft, spend the $500, just to make sure!

We ran into this when we sold a club plane.  Turns out, there was a lien for zero dollars from 30 years ago that was missed because nobody had ever done a title search until the new buyer had.  I guess the prior owner had paid off the lien, but the paperwork had never been officially completed.  In the meantime, that owner had died and the bank went out of business, so we had no idea how to satisfy the lien.  I forget how it got resolved, but it involved one of the club guys calling a few widows and children of people, and it prolonged the purchase process by about 4 months...

[carusoam]

I am a big fan of purchase agreements...

Best when written so the two parties can understand what they mean...

Since you may need a lawyer to go forwards with this.... consider using AOPA.  They have a legal department that might cost only a few dollars...?

Best regards,

-a-

[elimansour]

It's kind of stated in an indirect fashion in paragraph 3:

 3. Sellers warrant that the Aircraft will be free and clear of all outstanding financial obligations, liens, and encumbrances at the time of Closing.

The agreement is fairly seller favorable and should be reviewed by legal counsel - maybe even start off with a better form.  Second the advice to go to AOPA legal.  I think AOPA even has purchase agreement form on their website.

Jimmy also has a good form - maybe if you ask nicely he might give you a copy?

[pwnel]

You're making a bad start here. Pay peanuts, you get monkeys.  

Simple.  AOPA Legal + Aerospace Reports.  

 

[steingar]

I must be cognitively deficient.  When I bought my airplanes the agreement between buyer and seller was all we had.  The deals were sealed with a handshake.

[midlifeflyer]

23 minutes ago, steingar said:

I must be cognitively deficient.  When I bought my airplanes the agreement between buyer and seller was all we had.  The deals were sealed with a handshake.

Works just fine unless there is a problem and buyer and seller disagree on what was meant by the handshake. Rare, but if it happens, it gets very messy.

[KB4]

21 hours ago, J0nathan225 said:

3. Sellers warrant that the Aircraft will be free and clear of all outstanding financial obligations, liens, and encumbrances at the time of Closing.

The clause your are concerned about is within the agreement in Para #3. Word Title is not used, because Titles do not exist. Have AOPA do a search for you its a nominal fee. 

Cars, boats, motorcycles ect get titles but not GA aircraft. 

 

Consider closing in New York State, there is no sales tax attributable to the buyer.