Buy a plane that the owner never registered?

[Pedals2Paddles]

Bob buys a plane from Flying Aviation Inc, with a signed bill of sale. Bob never does the registration. Bob now wants to sell the plane to Al. Bill of sale again complete. But the FAA has no record of Flying Aviation Inc selling it to Bob.

Is that a problem? Will they make Bob register it first, then sell it?

 

[craigvince]

No problem, as long as Al has the original bill of sale from Flying Aviation to Bob and a bill of sale from Bob to Al. Or if the first Bill of Sale was filed with the FAA, that's fine too. Either way, just send in the new bill of sale and an application for registration to the FAA with your $5.00 check and you're good to go. I would suggest getting a title search though to be sure there are no outstanding liens on the plane before Al buys it from Bob. It only costs $79 and is well worth the money!

 

[Pedals2Paddles]

Agreed on the title search. My understanding is that any lien not filed with the FAA will not show up on the title search, but will also not fall on the new owner. So if there is some lien somewhere that was not on file with the FAA, we wouldn't know it and it also wouldn't become our responsibility?

 

[frfly172]

Get a title search on the aircraft.

 

[Pedals2Paddles]

Also, what about this... The registration was Flying Aviation Inc, not Bob. How does the FAA reconcile that this Bob guy was even allowed to sell the plane on behalf of Flying Aviation Inc? What if Flying Aviation Inc was owned by Bob's now deceased father and Bob is selling the plane?

 

[N747JB]

I am not a great do it yourself kind of guy, so I would contact a title/escrow company and pay them to handle the transaction. I used Aerospace reports on my last one, but there are several good ones in OKC that deal with this all the time. It is PROBABLY no big deal, but I would rather pay a couple $$ than find out later I have a problem. Once people get their money, they tend to be much less cooperative about fixing title issues.

 

[Tom-D]

Is that a problem?

YES


Will they make Bob register it first, then sell it?

Yes again, you must show ownership from each owner to the next. This is why getting the aircraft's history CD is so important. because in this case you are buying the aircraft from some one who does not own it IAW the FAA.

 

[Pedals2Paddles]

According to the reg form, proof of ownership is the bill of sale. Registration is not proof of ownership.


<< Sent from my mobile device at 0agl >>

 

[poadeleted20]

Agreed on the title search. My understanding is that any lien not filed with the FAA will not show up on the title search, but will also not fall on the new owner. So if there is some lien somewhere that was not on file with the FAA, we wouldn't know it and it also wouldn't become our responsibility?

That is true as long as it is not a possessory lien with the aircraft in the lienholder's possession. Examples of those include unpaid repair bills with the plane still in the shop, or an unpaid hangar/tiedown bill with the airplane still in the hangar/on the tiedown spot. Essentially, if the seller can deliver the aircraft to your possession (other than by sneaking it out of the lienholder's possession, e.g., breaking into the creditor maintenance shop in the middle of the night and pulling it out), any liens not recorded with the FAA at the time you file your new bill of sale are unperfectable.

 

[poadeleted20]

Also, what about this... The registration was Flying Aviation Inc, not Bob. How does the FAA reconcile that this Bob guy was even allowed to sell the plane on behalf of Flying Aviation Inc? What if Flying Aviation Inc was owned by Bob's now deceased father and Bob is selling the plane?

Doesn't matter if Bob has a valid Bill of Sale from Flying Aviation to Bob. Bob can then sell the plane to someone else with another Bill of Sale as long as Bob delivers the Flying->Bob Bill of Sale to be sent to the FAA along with the Bob->new buyer Bill of Sale. Only hitch here is that if there's a problem with the Flying->Bob Bill of Sale, or there have been liens recorded in the interim, the Bob->new buyer Bill of Sale won't be valid since Bob won't be in a position to sell the plane and may not be able to clear any liens recorded against the Aircraft in the previous owner's name.

It would be a lot easier if the new buyer insists that Bob register the aircraft in his own name before selling the plane to the new buyer. However, that may expose Bob to a lot of possible tax liability, which is probably why Bob didn't register it in the first place.

BTW, if the original seller does what the FAA regulations require and sends the aircraft registration back to the FAA with a check in the "Aircraft sold to _____" box, Bob cannot legally fly that plane until he registers it himself. That usually prevents people from pulling the stunt Bob did.

 

[ClimbnSink]

Bought a glider this way, seller never registered it. No problem.

 

[N801BH]

I am not a great do it yourself kind of guy, so I would contact a title/escrow company and pay them to handle the transaction. I used Aerospace reports on my last one, but there are several good ones in OKC that deal with this all the time. It is PROBABLY no big deal, but I would rather pay a couple $$ than find out later I have a problem. Once people get their money, they tend to be much less cooperative about fixing title issues.

Best answer yet......

 

[Pedals2Paddles]

Bob did not register it, and also never flew it. The bill of sale to Bob says "Flying Aviation Inc, Fred Jones, President. So if the title search matches that, which matches the bill of sale, it should be good? And no leins of course.


<< Sent from my mobile device at 0agl >>

 

[poadeleted20]

Bob did not register it, and also never flew it. The bill of sale to Bob says "Flying Aviation Inc, Fred Jones, President. So if the title search matches that, which matches the bill of sale, it should be good? And no leins of course.

It should be good as long as Bob has possession of the aircraft. But how long since it last flew? Was it cared for in the interim? Is there ay chance the Flying->Bob Bill of Sale is defective? Can you get a warranty from Bob on that point? The last two are good reasons to let an escrow company handle the transaction so you are sure that Bob doesn't get your money until the title clears Oklahoma City.

 

[Pedals2Paddles]

Bob has only owned it for about a year. Shouldn't have bought it, other partner backed out, got stuck with it and he can't afford it. He's explained the entire ownership history, and it does seem to match the documents. Sounds like the Title search will verify the paperwork. And if the title search doesn't match, it should be obvious.

We're considering the escrow service.


<< Sent from my mobile device at 0agl >>

 

[N801BH]

Bob has only owned it for about a year. Shouldn't have bought it, other partner backed out, got stuck with it and he can't afford it. He's explained the entire ownership history, and it does seem to match the documents. Sounds like the Title search will verify the paperwork. And if the title search doesn't match, it should be obvious.

We're considering the escrow service.


<< Sent from my mobile device at 0agl >>

Money well spent....

 

[jbarrass]

I am not a great do it yourself kind of guy, so I would contact a title/escrow company and pay them to handle the transaction. I used Aerospace reports on my last one, but there are several good ones in OKC that deal with this all the time. It is PROBABLY no big deal, but I would rather pay a couple $$ than find out later I have a problem. Once people get their money, they tend to be much less cooperative about fixing title issues.

Completely agree. The total process: escrow, title search & insurance, registration, etc. is likely less than a tank of gas. Dealing with the bureaucracy is best outsourced whenever practical.

 

[MauleSkinner]

I'd the registration current on the FAA website, or is there a possibility that the airplane's N-number has been reassigned?

I've seen a lot of airplanes over the years that changed hands several times without re-registration, but the fact that registrations now expire put a little different twist in it.

 

[Tom-D]

It should be good as long as Bob has possession of the aircraft. But how long since it last flew? Was it cared for in the interim? Is there ay chance the Flying->Bob Bill of Sale is defective? Can you get a warranty from Bob on that point? The last two are good reasons to let an escrow company handle the transaction so you are sure that Bob doesn't get your money until the title clears Oklahoma City.

this thread isn't about condition of the aircraft .
It is about the method of transfer of title.

Read the cover sheet of FAA form 8050-1.

You must show the FAA a legal title transfer by any legal means from one owner to the other.

The History CD from OKC will show the last registered owner, you must show a legal transfer of title from them to you. IF the bill of sale they signed shows a person who isn't you, you best have a bill of sale to cover that transfer too.

I went thru this with 34V it took 6 months to get it right. and the FAA to issue me a title that showed me as legal owner. Simply because the guy who I bought it from never registered it, and did not have a bill of sale from the previous owner, I was required to find the previous owner and rebuild the legal transfer chain from 2 previous owners.

 

[Tom-D]

Bob has only owned it for about a year. Shouldn't have bought it, other partner backed out, got stuck with it and he can't afford it. He's explained the entire ownership history, and it does seem to match the documents. Sounds like the Title search will verify the paperwork. And if the title search doesn't match, it should be obvious.

Order the History CD for the aircraft. See how the tile was formed with the two people who signed the last bill of sale.

If it was transferred to 1 person, you need them to sign off the bill of sale to you. IF the bill of sale was signed by two or more people, then you are required to have all parties sign off the bill of sale before the FAA will allow you to be legal owner.

 

[PaulMillner]

this thread isn't about condition of the aircraft .
It is about the method of transfer of title.

I went thru this with 34V it took 6 months to get it right. and the FAA to issue me a title that showed me as legal owner. Simply because the guy who I bought it from never registered it, and did not have a bill of sale from the previous owner, I was required to find the previous owner and rebuild the legal transfer chain from 2 previous owners.

Uh, the FAA doesn't issue titles. They only issue registration, that shows registered owner, and they document ownership transfer records... Two different things. Perhaps you're thinking of motor vehicles, where most states do issue titles?


Paul

 

[PaulMillner]

That is true as long as it is not a possessory lien with the aircraft in the lienholder's possession. Examples of those include unpaid repair bills with the plane still in the shop, or an unpaid hangar/tiedown bill with the airplane still in the hangar/on the tiedown spot. Essentially, if the seller can deliver the aircraft to your possession (other than by sneaking it out of the lienholder's possession, e.g., breaking into the creditor maintenance shop in the middle of the night and pulling it out), any liens not recorded with the FAA at the time you file your new bill of sale are unperfectable.

In practice, it doesn't work that neatly.


I had a late lien (note spelling) show up on my first aircraft. Only found out years later, when I sought to finance to pay for avionics upgrade and engine overhaul. The FAA Registry folks were uninterested in removing it... And with lien, no loan possible. Had to threaten lien holder with legal action to get him to remove.


Had a friend with similar situation, except the lien filing company had gone out of business. Very messy to resolve!


Paul

 

[Tom-D]

Uh, the FAA doesn't issue titles. They only issue registration, that shows registered owner, and they document ownership transfer records... Two different things. Perhaps you're thinking of motor vehicles, where most states do issue titles?


Paul

Your registration is your title.

 

[SCCutler]

In practice, it doesn't work that neatly.


I had a late lien (note spelling) show up on my first aircraft. Only found out years later, when I sought to finance to pay for avionics upgrade and engine overhaul. The FAA Registry folks were uninterested in removing it... And with lien, no loan possible. Had to threaten lien holder with legal action to get him to remove.


Had a friend with similar situation, except the lien filing company had gone out of business. Very messy to resolve!


Paul

I have had to deal with this before - whether it's an airplane or a building, no one (who doesn't do it all the time) knows how lien law works. I would rather explain to the lender why their security interest is validly perfected than try to get a stale lien-holder to release.

That said, I have also successfully collected on a lien which was stale or improperly-perfected, using the ignorance of the guy on the other side against him.

 

[Tom-D]

Pretty much tells you how to complete the form right here

http://www.faa.gov/documentLibrary/media/form/ac8050-2.pdf

Quote
AIRCRAFT BILL OF SALE INFORMATION
PREPARATION: Prepare this form in duplicate. Except for signatures, all data should be type-writ- ten or printed. Signatures must be in ink. The name of the purchaser must be identical to the name of the applicant shown on the Aircraft Registration Application, AC Form 8050-1.
When a trade name is shown as the purchaser or seller, the name of the individual owner or co-owners must be shown along with the trade name.
If the aircraft was not purchased from the last registered owner, conveyances must be submitted completing the chain of ownership from the last registered owner, through all intervening owners, to the applicant.

 

[Tom-D]

Remember the Registration is also notice to the FAA that the aircraft was sold. You must return the certificate to the FAA when you sell the aircraft with the new owners name and address entered on the back.

So if the new owner does not register it, and the guy you buy it from is not the same as the buyer from the last registered owner you have an open chain of ownership.

and the FAA will not allow you to register it in your name until the chain of ownership is complete.

The CD will also show any liens the FAA has recorded.

 

[ClimbnSink]

What does the registration slip say? Did the last registered owner sign it and the current owner never filled it in? Easy that way, as long as their are no liens.

 

[craigvince]

Your registration is your title.

Absolutely incorrect information! Your registration is only your registration. When you buy a car outright or pay off your loan, you get a title (pink slip) showing you own it free and clear. There is no such thing with an airplane. Title implies no liens or encumbrances and there is no way to prove this without a title search at the time of transfer. Producing a document from a title agent is the only way to produce verification of clean ownership.

I can't tell you how many times one of our customers have brought us a plane to sell and said they "own" the plane only to find out there was a lien 30 or so years ago that was never cleared off properly. The plane had changed "ownership" several times since then and nobody had done a title search so nobody knew about it. You see a registration card with the seller's name on it and assume he "owns" the airplane. Granted, in 99% of these cases, the loans were in fact paid off years ago but because of a clerical error, the liens were never released in the FAA's records. When we buy, sell or broker a plane (or even list a plane for sale), we do a complete title search so the buyer knows they're not buying someone else's debt. It doesn't matter if its a $15k Cessna 150 or a $2M Cessna Citation, you should always do a title search.

Bottom line: Use an escrow company to handle the transaction for you. The buyer and seller split the costs 50/50 just like a house deal so the cost ends up very minimal to each party. It is the ONLY way you can be sure everything is done right.

 

[Tom-D]

What does the registration slip say? Did the last registered owner sign it and the current owner never filled it in? Easy that way, as long as their are no liens.

Many times the seller will sign off the aircraft on the bill of sale and leave the buyers name off, and that bill of sale is passed along from buyer to seller a couple times. but the last registered owner fills out the back of their registration with the name of who they sold it to.
When the newest owner tries to use the bill of sale that was left blank by the first buyer, the FAA already knows the aircraft was sold, and who the buyer was. The FAA will not register the aircraft to the newest buyer with out showing a bill of sale for each ownership transfer.
Any body dies in the chain and you can't show a legal bill of sale it will require a long and involved process to show the aircraft ownership transfer was legal.

It really gets involved when the last registered owner is killed in the aircraft, he was divorced, and the wife got the aircraft thru a legal court settlement. ( no bill of sale) and the insurance company took custody of the wreckage (no bill of sale) then informed the FAA that the aircraft was destroyed, then sold it to a salvage company ( no bill of sale) who sold it to you as a restoration project. (no bill of sale) because after the FAA de-registered it it is no longer an aircraft.

Now do you know why you need the CD? it will show it was de-registered.

 

[Tom-D]

Absolutely incorrect information! Your registration is only your registration.

When a court asks you to prove you legally own the aircraft, what will you show them?

 

[N801BH]

Many times the seller will sign off the aircraft on the bill of sale and leave the buyers name off, and that bill of sale is passed along from buyer to seller a couple times. but the last registered owner fills out the back of their registration with the name of who they sold it to.
When the newest owner tries to use the bill of sale that was left blank by the first buyer, the FAA already knows the aircraft was sold, and who the buyer was. The FAA will not register the aircraft to the newest buyer with out showing a bill of sale for each ownership transfer.
Any body dies in the chain and you can't show a legal bill of sale it will require a long and involved process to show the aircraft ownership transfer was legal.

It really gets involved when the last registered owner is killed in the aircraft, he was divorced, and the wife got the aircraft thru a legal court settlement. ( no bill of sale) and the insurance company took custody of the wreckage (no bill of sale) then informed the FAA that the aircraft was destroyed, then sold it to a salvage company ( no bill of sale) who sold it to you as a restoration project. (no bill of sale) because after the FAA de-registered it it is no longer an aircraft.

Now do you know why you need the CD? it will show it was de-registered.

Oh Boy.. That would make a GREAT movie.........

 

[Tom-D]

Oh Boy.. That would make a GREAT movie.........

I tried to buy an aircraft from a salvage yard once, and that was the case. The data tag belonged to an aircraft that did not exist.

 

[poadeleted20]

this thread isn't about condition of the aircraft .
It is about the method of transfer of title.

Read the cover sheet of FAA form 8050-1.

You must show the FAA a legal title transfer by any legal means from one owner to the other.

The History CD from OKC will show the last registered owner, you must show a legal transfer of title from them to you. IF the bill of sale they signed shows a person who isn't you, you best have a bill of sale to cover that transfer too.

That's exactly what we're discussing -- the seller has a Bill of Sale from the registered owner to the seller, and the seller is delivering the aircraft with that Bill of Sale along with a new Bill of Sale from the seller (named as the buyer in the old Bill of Sale) to the new buyer.

 

[poadeleted20]

Your registration is your title.

No, it isn't.

 

[poadeleted20]

What does the registration slip say? Did the last registered owner sign it and the current owner never filled it in? Easy that way, as long as their are no liens.

Nope. The old registration certificate is absolutely completely totally worthless in proving the transfer of ownership no matter what it says or who signed it. Only a Bill of Sale signed by the registered owner matters.

 

[poadeleted20]

When a court asks you to prove you legally own the aircraft, what will you show them?

You'd better show them the Bill of Sale, because an old registration certificate proves nothing about a previous owner's transfer of ownership to you. As he said, even a current registration certificate shows only that the aircraft is legally registered, and nothing about ownership/encumbrances.

 

[Tom-D]

You'd better show them the Bill of Sale, because an old registration certificate proves nothing about a previous owner's transfer of ownership to you. As he said, even a current registration certificate shows only that the aircraft is legally registered, and nothing about ownership/encumbrances.

The current bill of sale does not show encumbrances either.

And in many cases the true owner does not have a bill of sale and they won't be the registered owner.

Simply read what is written in the instructions for 8050-1.

Quote:
EVIDENCE OF OWNERSHIP
7. The applicant for registration of an aircraft last registered in the United States must submit conveyances completing the chain of ownership from the last registered owner, through any intervening owners, to the applicant.
8. A BILL OF SALE. AC Form 8050-2, or its equivalent, which transfers all right, title, and interest in a specifically described aircraft, is evidence of ownership.
9. A CONTRACT OF CONDITIONAL SALE may be recorded as evidence of ownership and the certificate of registration issued to the buyer.

 

[poadeleted20]

The current bill of sale does not show encumbrances either.

And in many cases the true owner does not have a bill of sale and they won't be the registered owner.

While what you say is true, it's not relevant to the question at hand.

 

[Tom-D]

While what you say is true, it's not relevant to the question at hand.

It is to the underlying issue of ownership, and who can sign off the bill of sale.

Beware the conveyances in place. The last registered owner may be selling an aircraft that belongs to an estranged wife.

 

[poadeleted20]

It is to the underlying issue of ownership, and who can sign off the bill of sale.

Read the original post, Tom.