Past non compliance with AD's question

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jmn444

Pre-takeoff checklist
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Jason
Hi, I'm fairly new, and have a question on the potential liability (if any) of past non-compliance with airworthiness directives:

The scenario: Looking to buy into a C-corp that owns a plane, the pre-buy/annual determined that a repetitive AD has not been complied with.

The question (or really, questions!): Does the FAA impose financial penalties for past non-compliance? Is it likely that they will? If so, would the C-corp be potentially liable for it or would it fall directly on the PICs based on their use of the plane? Or does the concern rest solely on the prior A&P that missed it?

Let me know what you guys think!
 
As far as the FAA goes, it is the pilot in command who is responsible for making sure the aircraft is airworthy. It's not required to comply with ADs unless you fly the aircraft so I have no idea why the FAA would care if you sold an unairworthy aircraft. Frankly each pilot who flew the plane in an unairworthy condition is potentially individually subject to FAA sanction.

Now the buyer, in a civil suit can very much sue the corporation (as the seller) if they represent the aircraft as airworthy when it has uncomplied with ADs. You'd have a hard time dumping all that liability on some mechanic.
 
The FAA is unlikely to enforce over a past failure to comply with an AD, now current, documented in a logbook. I know of a case where the FAA fined a not-for-profit incorporated club. An accident occured and their investigation found an AD that had not been complied with. It had nothing to do with the accident and the plane had been signed off for annual by many IAs over the years. Last IA signing the annual off was also fined. The PIC got no enforcement.
 
So likely no fines if no accident then for the existing C-corp? My concern is purely if any liability could follow my shares if I buy in.
 
What was the AD? why was it overlooked?

There are some ADs which might not be clear. I had one IA swear I needed a crank inspection on a 150hp lycoming while FAA and two other IA's say its not required.
 
It was the crank AD on the lycoming o-360 180hp. no clue as to why it was overlooked. the way I read it, it is definitely required.
 
There may have been another one as well, but that's the one that requires getting reported to the FAA after compliance, so that one was my biggest concern.
 
If owned in a corp they would penalize the corporation not the owners directly so that would diminish your ownership value by adding a liability to the corp. They do not come after you personally since you had no involvement in the action.

It doesn't sound to big of problem to me but if you are concerned you can buy the shares of the corp with a letter from the seller indemnifying you from any action out of this incidence(s).
 
They will be prior to my buy in.
 
jmn444 said:
It was the crank AD on the lycoming o-360 180hp. no clue as to why it was overlooked. the way I read it, it is definitely required.
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Depends on the AD and the crank. Even IF it isn't required it is a good example of why making an entry that the AD does not apply isn't a bad idea.
 
There are a lot of legal reasons why you might not want to buy the corporation rather than just buying the airplane from the corporation. Talk to your attorney about all the legal issues appertaining thereto, and consider that the seller may be trying to unload some sort of a white elephant on you along with the airplane.

Either way, unless/until you fly it, noncompliance with AD's is not an issue for you, and the fact that it was previously flown in a noncompliant (hence, unairworthy) condition is not an issue for you, only for whoever flew it that way.
 
I'm not buying the whole corp, just 1/5. Part of the appeal of this is the low fixed monthly costs of the group.
 
Otherwise, I agree, I would buy the asset rather than the stock if I wanted to own it 100%.
 
jmn444 said:
I'm not buying the whole corp, just 1/5. Part of the appeal of this is the low fixed monthly costs of the group.
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Ah, yes - standard deal with group ownership. In any event, make sure the plane is fully AD-compliant before you put your money down. As for the rest, the First Rule of Italian Driving applies.
 
hahaha, I try to drive fast enough that nothing matters!
 
and the mirrors on my track car REALLY do stink! I have a 5 panel mirror that I've got to install before next season....
 
jmn444 said:
and the mirrors on my track car REALLY do stink! I have a 5 panel mirror that I've got to install before next season....
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Mine needs one too, the padding on the cage makes the rear window tiny in the mirror,

Now, what kind of plane? Last one I found "not" complied with turned out to have a solid crank... (PA-28)
 
It's a PA-28-180. verified the hollow crank.
 
jmn444 said:
It's a PA-28-180. verified the hollow crank.
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With the hollow crank, make sure it's really been done. And is that engine subject to the oil impeller AD, too? Not sure if the O-360's are subject to that one or just the O-320's.
 
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jmn444 said:
It was the crank AD on the lycoming o-360 180hp. no clue as to why it was overlooked. the way I read it, it is definitely required.
Click to expand...

It would be really good to find out. My A&P used to tell me stories of planes that said "AD xxxx complied" in the logs, but by actual eyeball inspection of the installed items (serial #'s, etc), clearly were not.

jmn444 said:
I'm not buying the whole corp, just 1/5. Part of the appeal of this is the low fixed monthly costs of the group.
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Maybe one way of keeping costs low wuz scrimping on AD inspections? :dunno:
 
I just meant the hangar/insurance/annual cost being split 5 ways is attractive. The airplane is under utilized so buy-in makes a lot of sense for me.
 
Ron Levy said:
With the hollow crank, make sure it's really been done. And is that engine subject to the oil impeller AD, too? Not sure if the O-360's are subject to that one or just the O-320's.
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I believe we addressed the oil impeller, it either didn't apply or had been updated, can't recall. I'll double check.
 
jmn444 said:
I just meant the hangar/insurance/annual cost being split 5 ways is attractive. The airplane is under utilized so buy-in makes a lot of sense for me.
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Assuming the reserves are not set too high, a 5 way partnership is a great way to own and fly a Cherokee. You will get plenty of access to flights. I owned 100% of a Cherokee and took on 3 non equity partners which works the same way and no one of us every wanted the plane at the same time until fly ins and then we flew down together saving fuel.

Generally it would be good if fixed costs such as annual inspection/AD compliance; insurance, hangar and taxes are paid split monthly or annually and maintenance, oil changes paid as you go.

I would be skeptical of engine reserves especially if they are higher than $15 per flight hour.
 
Quarterly payments for the ins/hangar/annual, and the rest is assessed as incurred. no engine reserves at this time.
 
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