Aircraft liens again

Dave Siciliano

Dave Siciliano

Final Approach
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Dave Siciliano
Met with our mechanic today and in the course of things, he mentioned he'd just won in court against a party he did work for two years ago. Evidently, he didn't get paid, liened the aircraft and the other party sued to get it released. He just won against a motion for summary judgment (so, the next step is up to the owner). Anyway, he located the plane and is thinking about seizing it and locking it up until he's paid (which he can do here in Texas). The owner offered to sell it. My mechanic wants to offer to purchase it at a price where he will get paid and we purchase the plane for enough to do that at a price that works for us.

So, if we did this, would we possibly be stepping into a mess? We can do a title search, but what if other parties are owed money? Can they make a claim after we purchase it? This seller's word doesn't seem to be worth much. Getting a signed agreement from him with any reps wouldn't be worth the paper it's written on. The only reason we'd look is because our mechanic does excellent work, he inspected the plane and says it's in good shape the the seller needs to get out.

Should we just pass, or can we insulate ourselves well enough to proceed?

Best,

Dave
 
I would think a) you can check with the FAA registry for any other liens, b) if you're dealing with the owner and the one guy who has a lien, make them both agreed and what could possibly go wrong? :D

Then you just have to judge if the plane is worth buying.... Ya know, the usual stuff ...and your mechanic has a vested interest so I'd get another opinion.
 
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Thanks Mike. We're on that track. Problem is we don't know someone else won't come outta the woodwork later. We will know what's on the registry when we look to close. Is there a time frame in which a lien must be filed to be valid? There is also a note holder (bank) we know we will need released.

Best,

Dave
 
Dave:

Give me a call about this one.

PS- what kind of plane?
 
Dave Siciliano said:
Thanks Mike. We're on that track. Problem is we don't know someone else won't come outta the woodwork later. We will know what's on the registry when we look to close. Is there a time frame in which a lien must be filed to be valid? There is also a note holder (bank) we know we will need released.

Best,

Dave
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AOPA used to have a title insurance service.
 
I would say that once the aircraft changes hands and you are the new owner, no one could file a lien on the aircraft after that date. The 172 I bought last year was the same situation, owner couldn't come up with the money for the engine overhaul and the mechanic filed a lien. Then the bank stepped in and wanted the plane also. The mechanic had to buy it from the bank, then have the owner sign it over to him. I stepped in and bought it for what the mechanic had in it, good deal for both of us.
 
Thanks. Spike was nice enough to remind me how the legalities work. Just don't want to get into a mess even if what I do legally protects me. Just don't like messes <g>. Have enough of them at work all day.

Best,

Dave
 
Dave Siciliano said:
Met with our mechanic today and in the course of things, he mentioned he'd just won in court against a party he did work for two years ago. Evidently, he didn't get paid, liened the aircraft and the other party sued to get it released. He just won against a motion for summary judgment (so, the next step is up to the owner). Anyway, he located the plane and is thinking about seizing it and locking it up until he's paid (which he can do here in Texas). The owner offered to sell it. My mechanic wants to offer to purchase it at a price where he will get paid and we purchase the plane for enough to do that at a price that works for us.

So, if we did this, would we possibly be stepping into a mess? We can do a title search, but what if other parties are owed money? Can they make a claim after we purchase it?
Click to expand...
If there are no other prior liens on file, and the airplane is not in the possession of someone with a possessory lien (like another mechanic, a hangarkeeper, etc), there is no big deal. The old owner, having clear title other than the lien by your mechanic, can pass title to your mech since your mech can give a lien release for his claim at settlement in exchange for the title.

If other parties already have liens on file at the FAA, those prior liens must get paid off before title can transfer. That means he can't buy the plane from the current owner without obtaining releases from those other lienholders, and that means paying them off first. There are several ways to make this happen, but essentially, whatever price is agreed with the owner, all parties sit down together at a settlement session. The money being paid for the plane is put on the table, the other lienholders get their shares in return for a release, and whatever's left goes to the owner. If there isn't enough to go around, the title is still encumbered unless the buyer is willing to pay off the remaining lienholders (and the seller gets nothing).

Another option is that your mech can have the plane seized and sold at a sheriff's auction, but if he does, the money collected must first go to satisfy the prior lienholders, and only then will the remaining money be available to pay off your mech (and any money left after that goes to the old owner). Your mech could certainly bid on the plane, and if he wins, effectively gets to pay himself off, but if his winning bid is insufficient to satisfy the other lienholders' claims, he gets the plane but is out whatever he was owed by the old owner.

He could also try to seize it himself, but again, he will be unable to obtain title until the prior lienholders are paid off.

If other parties do not have liens on file or possession of the aircraft, their claims do not survive the transfer of title. IOW, if you haven't filed a lien on a plane for money owed by its owner, you can't file one after the owner passes title to another party. All you can do then is sue the old owner and try to obtain judgement in court against whatever other assets s/he has.

Bottom line: Get that title search. If the aircraft is clear of other liens, and is in the owner's possession (and make sure it's not in some FBO's hangar, as possessory liens supersede nonpossessory liens), your mech should be OK on the described deal.
 
Dean said:
I would say that once the aircraft changes hands and you are the new owner, no one could file a lien on the aircraft after that date.
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That is almost always true. There are exceptions involving buyers in due course, but this particular situation doesn't involve a dealer.
 
Ron Levy said:
If there are no other prior liens on file, and the airplane is not in the possession of someone with a possessory lien (like another mechanic, a hangarkeeper, etc), there is no big deal. The old owner, having clear title other than the lien by your mechanic, can pass title to your mech since your mech can give a lien release for his claim at settlement in exchange for the title.

If other parties already have liens on file at the FAA, those prior liens must get paid off before title can transfer. That means he can't buy the plane from the current owner without obtaining releases from those other lienholders, and that means paying them off first. There are several ways to make this happen, but essentially, whatever price is agreed with the owner, all parties sit down together at a settlement session. The money being paid for the plane is put on the table, the other lienholders get their shares in return for a release, and whatever's left goes to the owner. If there isn't enough to go around, the title is still encumbered unless the buyer is willing to pay off the remaining lienholders (and the seller gets nothing).

Another option is that your mech can have the plane seized and sold at a sheriff's auction, but if he does, the money collected must first go to satisfy the prior lienholders, and only then will the remaining money be available to pay off your mech (and any money left after that goes to the old owner). Your mech could certainly bid on the plane, and if he wins, effectively gets to pay himself off, but if his winning bid is insufficient to satisfy the other lienholders' claims, he gets the plane but is out whatever he was owed by the old owner.

He could also try to seize it himself, but again, he will be unable to obtain title until the prior lienholders are paid off.

If other parties do not have liens on file or possession of the aircraft, their claims do not survive the transfer of title. IOW, if you haven't filed a lien on a plane for money owed by its owner, you can't file one after the owner passes title to another party. All you can do then is sue the old owner and try to obtain judgement in court against whatever other assets s/he has.

Bottom line: Get that title search. If the aircraft is clear of other liens, and is in the owner's possession (and make sure it's not in some FBO's hangar, as possessory liens supersede nonpossessory liens), your mech should be OK on the described deal.
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State or local Liens are not always on file at OKC, and if this is true the FAA will transfere title, because they simply don't know the lien exists.
 
NC19143 said:
State or local Liens are not always on file at OKC, and if this is true the FAA will transfere title, because they simply don't know the lien exists.
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Nonpossessory liens against aircraft not filed at the FAA Civil Registry are generally unenforceable, and never enforceable outside the jurisdiction in which the lien was filed. In any event, once title transfers, the non-FAA-filed lien is (with some very narrow exceptions) dead.
 
Ron: Excellent discussion, and absolutely correct. I would not change a word.
 
That should go somewhere here as a sticky or FAQ or something! Nice writeup, Ron.
 
If anyone wants more info on the subject, I recommend J. Scott Hamilton's "Practical Aviation Law" for light reading (an aviation law book for pilots) or Lawrence Gesell's "Aviation and the Law" for heavy reading (an aviation law book for lawyers).
 
Ron Levy said:
If other parties do not have liens on file or possession of the aircraft, their claims do not survive the transfer of title. IOW, if you haven't filed a lien on a plane for money owed by its owner, you can't file one after the owner passes title to another party. All you can do then is sue the old owner and try to obtain judgement in court against whatever other assets s/he has.
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(emphasis added by me)

Okay, I'm just playing devil's advocate here, I'm not in this situation, I'm not an aircraft owner, nor do I intend to become one in the near future.

Let's say that ownership was transferred by the individual to a LLC that the individual forms? The title gets passed to another party, so the lienholders would not be able to go after the plane anymore, is that correct? Of course, I realize that they can still sue the original owner, but my question pertains specifically to the lien on the plane itself after ownership is transferred from the individual to the LLC.
 
Dave Siciliano said:
Should we just pass, or can we insulate ourselves well enough to proceed?

Dave
Click to expand...

Title Insurance. The title insurance company will look at it and
decide if they want to write it or not. I've gotten it on a couple
planes where I had a hint of a potential future issue. I've always
used Aero Space Reports.

RT
 
t0r0nad0 said:
Let's say that ownership was transferred by the individual to a LLC that the individual forms? The title gets passed to another party, so the lienholders would not be able to go after the plane anymore, is that correct? Of course, I realize that they can still sue the original owner, but my question pertains specifically to the lien on the plane itself after ownership is transferred from the individual to the LLC.
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OK, let's see if I got this --
  • The creditors have not filed a lien and don't have possession.
  • The owner forms an LLC and transfers the plane to it.
Right?

At this point, the creditors are no worse off than before, because the debt is owed by the owner, and the owner still owns the LLC which owns the plane, so his ownership of the LLC can be attached to settle his debt, effectively taking the plane. I don't think any court in the land would have trouble enforcing that, especially given the obvious intent of the ownership transfer -- hiding assets ain't popular down the old courthouse. There might even be sufficient legal basis to have the transfer to the LLC voided and the aircraft seized.

That said, I don't see this as a real likely situation. The folks who are likely to be owed money over an aircraft (dealers, brokers, maintenance shops, hangarkeepers, etc) don't stay in business long without understanding the lien business. For that reason, they don't often let a plane out of their possession without either payment or a lien filed at the FAA Registry -- or an alternate means of obtaining payment ("Wire Guido, Hoboken -- Have Tire Iron, Will Travel").
 
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