Anyone deal with a clouded title issue?

[alaskan9974]

I made an offer and the seller accepted, the escrow is fully funded, the sellers title company and my own title company both came back clean prior to the offer, but right before closing the sellers title company found that in the 80s the business who sold it to another business didn’t include their full business name.

I think the seller in the 80s omitted “the” from the name so they sent me a report saying it was clouded and the seller would be paying to fix it. The seller owned it for 30+ years, I asked if they filed a quiet title settlement since they wanted me to sign a waiver that the title had an issue, they haven’t yet.

They told me in the future if I sell it I have to disclose it. I don’t have any intentions of selling but I told them I’d rather have it fixed before closing. The escrow company told me the business is long since closed and no agents are reachable.

 

[Jim K]

I made an offer and the seller accepted, the escrow is fully funded, the sellers title company and my own title company both came back clean prior to the offer, but right before closing the sellers title company found that in the 80s the business who sold it to another business didn’t include their full business name.

I think the seller in the 80s omitted “the” from the name so they sent me a report saying it was clouded and the seller would be paying to fix it. The seller owned it for 30+ years, I asked if they filed a quiet title settlement since they wanted me to sign a waiver that the title had an issue, they haven’t yet.

They told me in the future if I sell it I have to disclose it. I don’t have any intentions of selling but I told them I’d rather have it fixed before closing. The escrow company told me the business is long since closed and no agents are reachable.

I had a similarish issue on my plane's title. Someone had sent a registration transfer form to the faa, but no bill of sale or anything from the then current owner. For whatever reason, the faa scanned that form in even though the plane never actually sold. So now, it's part of the permanent record and gets flagged on every title search, even though the plane has changed hands a couple times since and all the parties involved in that aborted transaction are dead (I looked because I was going to try to clean it up).

I decided that since no subsequent owner has had any trouble registering, insuring, or flying the plane, it wasn't worth worrying about. The broker said these issues are not uncommon. I know it'll come up when I sell, but it has cost me zero sleep in the 6 years I've had my plane.

 

[Craig]

I'm eventually going to have to deal with a messed up title on my L-5. Was owned by a company and had an SBA lien. Company went broke, a/c sold as seized asset. Lien never released and the auction buyer didn't finish clearing the tile when he sold it to me and then he dropped dead a few years later. What paperwork I had was lost in a flood....

 

[OneCharlieTango]

I had a similar issue (previous loan got sold, bank got sold, etc). AOPA Legal Services got me hooked up with someone who got it taken care of. I think I made maybe 3 phone calls and didn't have to pay anything.

 

[alaskan9974]

I guess I’m just curious what the risks are? I didn’t really need another plane it was just a good price, so I don’t mind it sitting until it’s sorted out. I honestly forgot about it until I got the set of wing covers in the mail the other day.

It’s been two months since we were supposed to close, but with the shutdown it’s not like the faa is even there I assume for any new document requests or filings anyway. It is in the purchase contract they deliver with a clear title so I’m content just waiting to see what they do.

 

[airtoys]

I guess I’m just curious what the risks are? I didn’t really need another plane it was just a good price, so I don’t mind it sitting until it’s sorted out. I honestly forgot about it until I got the set of wing covers in the mail the other day.

It’s been two months since we were supposed to close, but with the shutdown it’s not like the faa is even there I assume for any new document requests or filings anyway. It is in the purchase contract they deliver with a clear title so I’m content just waiting to see what they do.

The main risk is most banks will not finance an aircraft without a clear title, even if it’s obviously an erroneous lien that was never properly released.

This will potentially have an impact on the buyer pool and resale value when the time comes.

 

[midlifeflyer]

and the seller would be paying to fix it

If that’s going to happen, I’m not sure I understand the problem. Then again, without seeing the paperwork, I really don’t know what’s happening,

 

[BillTIZ]

I worked an aircraft purchase and found an ancient lien that was not properly released. I found this myself sifting through the aircraft records the FAA provides on CD. A little research revealed that the small town bank had been bought by another bank. In the records I did have a copy of the release from the bank on the original note. I called, spoke with a managing loan type person. Explained that the release of lien, more than 20yrs old, had not been filed properly and was not accepted by the FAA. I sent them copies, a proper form, and where in the FAA to send it. Less than a month later the paperwork was processed through the FAA and we completed the sale.

 

[alaskan9974]

If that’s going to happen, I’m not sure I understand the problem. Then again, without seeing the paperwork, I really don’t know what’s happening,

They tried to have me sign a waiver to take it acknowledging the issue, I declined but there is a chance they may just back out and sell as is.

 

[M20K]

If you both paid Title Companies and you put money in escrow based on their information, I'd go after them to correct the error. Start with the current owners company and pressure them to fix it. If they don't do it for whatever reason, go after your Title Co. for the error.

If they both hedge, discuss it with an attorney and I bet one phone call will get them to resolve the issue. They are in the business to tell you that the Title is clean. If they tell you it is and it isn't, it's on them to see if they can clean it up.

 

[midlifeflyer]

If you both paid Title Companies and you put money in escrow based on their information, I'd go after them to correct the error. Start with the current owners company and pressure them to fix it. If they don't do it for whatever reason, go after your Title Co. for the error.

If they both hedge, discuss it with an attorney and I bet one phone call will get them to resolve the issue. They are in the business to tell you that the Title is clean. If they tell you it is and it isn't, it's on them to see if they can clean it up.

Might be a good idea to run this by a lawyer for a number of reasons, but I learned a long time ago that the fabled call from an attorney doesn’t have the mythical powers often attributed to it.

It always depends what the paperwork says. From the little stated, seems we are pre-closing. Even in real estate deals, it’s more common that providing good title is a condition for closing - the buyer is no longer obligated to buy - not an affirmative obligation for the buyer to correct title defects. And until and unless there is a title policy issued, there might be no liability on the title company.

Escrow? Unless there is something different in the paperwork for this particular transaction, the escrow agent’s obligation is to make sure money doesn’t pass to the seller unless there is good title and transfer documents properly recorded.

IOW…

without seeing the paperwork, I really don’t know what’s happening,

 

[midlifeflyer]

I worked an aircraft purchase and found an ancient lien that was not properly released. I found this myself sifting through the aircraft records the FAA provides on CD. A little research revealed that the small town bank had been bought by another bank. In the records I did have a copy of the release from the bank on the original note. I called, spoke with a managing loan type person. Explained that the release of lien, more than 20yrs old, had not been filed properly and was not accepted by the FAA. I sent them copies, a proper form, and where in the FAA to send it. Less than a month later the paperwork was processed through the FAA and we completed the sale.

If we're telling stories, here's one. The 15 year old unreleased lien was with a bank that had gone through multiple mergers and acquisitions. Finding out the current lender was typically easy. But there was a twist. It turned out that, at the time of the loan, the original lender was in the process of changing its name. It jumped the gun on that and began using the new loan documents before the name change was approved. In the meantime, the bank was sold, so the name was never approved.

Since it was never legally the bank's name, the successor's local branch was worried about signing off on the release. I ended up dealing with the current bank's legal department. Even that took a bit of negotiation, but I had a good idea which button to press.

 

[MauleSkinner]

Even that took a bit of negotiation, but I had a good idea which button to press.

Anything resembling, “you may very shortly own an airplane with a title problem. How are you going to resolve that so you can sell it?”

 

[schmookeeg]

I'm surprised the escrow and/or title company are pushing for a waiver instead of a quiet title action. The seller needs to correct this, and you were right to refuse the waiver. Once you sign that waiver, the problem is yours and yours alone.

 

[midlifeflyer]

Anything resembling, “you may very shortly own an airplane with a title problem. How are you going to resolve that so you can sell it?”

Nope. I'm not sure how that would happen or how it would help my client, who was the seller.

Much simpler. I just asked the bank's lawyer if they could get me the name of their local law firm to accept service of process in the quiet title action. He replied, "oh hell, I'll sign it."

 

[schmookeeg]

Now bill escrow for doing their job for them.

 

[MauleSkinner]

Now bill escrow for doing their job for them.

Isn’t escrow’s job merely to hold funds until closing?

As an aside, I learned something about escrow when I did a land sale this summer…it’s merely a bank account, probably set up by an attorney’s office, dedicated to holding escrow funds. Not that I thought it was much different, I’d just never thought about it before.

 

[midlifeflyer]

Now bill escrow for doing their job for them.

If you are talking about my story, it wasn't escrow's job.

Escrow - a neutral stakeholder to ensure the conditions for (a) transfer of ownership to the buyer and (b) payment to the seller are satisfied before either occurs.

The service they typically provide includes a report on the state of the title, but doesn't obligate anyone to fix it if there is a problem. At most, if the buyer decides it's a no-go, no ownership transfer takes place , the purchase contract is cancelled, the purchase money deposited is returned to the buyer., and everyone goes their separate ways.

If it's anyone's "job" to clear the title, it's the seller's if they want to sell the airplane and the buyer is not willing to accept a title with a cloud. If the seller previously bought a title insurance policy (separate from anything having to do with the escrow), they the seller passes that obligation to their own title insurer.

In practice, these companies take care of simple title issues often with just a phone call or letter. So often that I guess many people think that it's their job to clear title, no matter how big or involved the problem. There isn't even one of the several title problems I've dealt with that I would expect the escrow company to clear. The opposite, actually. When it's not "the usual," the escrow company will generally inform the seller they can't deal with it and that the seller should engage counsel - like in this one.

 

[schmookeeg]

I have been lucky then, and had my escrow companies offer to quiet titles for me in these circs in the past. I didn't fully appreciate at the time they were doing me an (upcharged) solid.

 

[midlifeflyer]

I have been lucky then, and had my escrow companies offer to quiet titles for me in these circs in the past. I didn't fully appreciate at the time they were doing me an (upcharged) solid.

Less lucky than ordinary WAG - 90% of the time, it's easy and they take care of it. Most typical lien is a bank security interest and someone neglected to send the release it. It's a simple matter of contacting the bank or successor's loan department (I would be surprised if they have a list of loan record department contacts). The bank looks it up, finds that it was paid (or simply not a live loan), send the release, and it's done. When more is needed, like when the bank says no or there are more significant defects, and litigation to quiet title looks like it will be needed, it's time for the lawyers - retained by the owner, not the escrow company.

Same thing happens in the real estate title world.

 

[TCABM]

Less lucky than ordinary WAG - 90% of the time, it's easy and they take care of it. Most typical lien is a bank security interest and someone neglected to send the release it…..

That does sound straight forward. We looked at a plane that had a missing bill of sale from 1974. No liens or anything else, just a remark there’s missing docs showing Company A sold it to Company B in the early 1970s.

I assume something like that could be resolved thru the quiet title process, correct?

 

[midlifeflyer]

That does sound straight forward. We looked at a plane that had a missing bill of sale from 1974. No liens or anything else, just a remark there’s missing docs showing Company A sold it to Company B in the early 1970s.

I assume something like that could be resolved thru the quiet title process, correct?

Yes, it could. On something of that type and that old, it can get costly. A quiet title involves a lawsuit naming everyone who has even a potential interest in the property. Ultimately, a court will usually authorize service by publication - one of those legal classified ads no one but lawyers and property flippers read. But that usually requires the plaintiff to show that after a diligent search, they cannot be found, so some level of investigation is necessary.

 

[Brad W]

this seems like one of those situations where I want to sit back and notice just how absolutely stupid we are (we as a society I mean...)
lawyers and title companies and the rest of it, making headaches for others and making money out of nothing. We've made an art out of making the simple very complicated.

My only question is this. Are either of these two companies from the 80's still around? especially the seller in that deal? And if they are still around, do they still exsit in teh same form or just in name only, resulting from corporate mergers or sell-outs, etc...
Seems to me that the seller is the only party that might arguably still be able to lay claim to ownership of the thing on paper
but clearly they don't care and haven't cared for a very very long time.... they sold it fair and square

 

[midlifeflyer]

My only question is this. Are either of these two companies from the 80's still around? especially the seller in that deal? And if they are still around, do they still exsit in teh same form or just in name only, resulting from corporate mergers or sell-outs, etc...

The technical problem is not knowing the answer to those questions.

I agree that the process could be easier and less convoluted. There are definitely situations in which the chances of an old lien or break in the chain being a real problem are miniscule. Title insurance companies sometimes look at those and will issue policies anyway, including covering the defect. I saw lots of that in the real estate development mess during the recession.

Bear in mind that no one is preventing the sale from taking place - except the buyer who doesn’t want to waive clean title.

 

[alaskan9974]

this seems like one of those situations where I want to sit back and notice just how absolutely stupid we are (we as a society I mean...)
lawyers and title companies and the rest of it, making headaches for others and making money out of nothing. We've made an art out of making the simple very complicated.

My only question is this. Are either of these two companies from the 80's still around? especially the seller in that deal? And if they are still around, do they still exsit in teh same form or just in name only, resulting from corporate mergers or sell-outs, etc...
Seems to me that the seller is the only party that might arguably still be able to lay claim to ownership of the thing on paper
but clearly they don't care and haven't cared for a very very long time.... they sold it fair and square

No the company has been out of business for over 30 years, the escrow and title company, one and the same said they cannot find agents from the company that sold it. It’s only had 4 owners in its life and two owners since that business sold it including the seller.

I’ll ask about the title insurance coverage I didn’t know it was an option for aircraft.

Next transfer document is Bill of Sale, undated, recorded 12/31/88 as conveyance *** from Cessna Finance Corporation to ****

(Please note, no name change/merger documents from **** to **** appears on file with the FAA at this time. As such, this does not appear to be a proper interest transfer to maintain the chain of title.)

The seller didn’t include one word in their business name on the sale document from the purchase document, but the agents signing for both the finance for purchase from Cessna and those on the sale document to another company are the same.