Lawyer Monthly Magazine - February 2019 Edition

FEB 2019 36 Expert Insight www. lawyer-monthly .com Can you break down how sell- ing or purchasing airplanes dif- fers to more common items of property, such as real estate? Aircraft in the US and other countries are titled on a na- tional registry as opposed to a local registry with title to real es- tate. Unlike real estate, security interests in aircraft are record- ed both on a national registry and on an international reg- istry. The international registry was primarily designed to pro- tect lenders’ interests because aircraft are moveable. If the security interests were only re- corded on a national registry, an aircraft could be sold in an- other country without a buyer knowing of the lien. An astute buyer must search both the national and international reg- istries to ensure it obtains clear title to the aircraft. In addition, the terminology in an aircraft purchase agreement is differ- ent from a real estate contract. Can you briefly share the reg- ulatory requirements clients must meet in order to success- fully sell or purchase their air- plane? Although every country has dif- ferent regulations, they all have regulations with which must be complied. For example, the US has citizenship requirements for registering an aircraft on the US registry. Failing to meet the citizenship requirements can AVIATION TRANSACTIONS Buying Your Own Set of Wings: What to Consider with Aviation Transactions cause deregistration of an air- craft and can greatly impact a sale or purchase. Many other countries have citizenship re- quirements. In addition, the registration and deregistra- tion regulatory requirements must be met. If an aircraft is bought by a US buyer but is registered on a foreign registry, importation regulations must be followed. Conversely, if a US registered aircraft is sold to a buyer who wants to register the aircraft in another country, deregistration and export reg- ulations, such as obtaining an export certificate of airworthi- ness from an FAA certified rep- resentative, must be followed. When do issues arise? What are, in your experience, com- mon reasons to why transac- tions go wrong? Issues arise if a buyer is not ex- perienced in aviation matters and fails to employ experi- enced representatives to as- sist them with the purchase. If a buyer wants an aircraft that it can charter under FAA Part 135, the aircraft will need to meet certain technical require- ments. If the aircraft only meets personal use requirements under FAA Part 91, that buyer may not be able to charter the aircraft and may no longer be able to afford the aircraft it purchased. If the aircraft is be- ing purchased for charter, the buyer needs to specify in the contract that the seller repre- sents that the aircraft meets all requirements of FAA Part 135. How important is the contract during aviation transactions? What things must be addressed in such contracts? The contract is extremely im- portant. Technical issues, such as the condition of the aircraft, its equipment and its logbooks, specifications of the aircraft, where the aircraft is going to be registered, whether it needs to be deregistered, damage history, inspection rights and conditions to close, must all be set forth in the Aircraft Purchase Agreement. The contract must be clear and unambiguous in its terms and should specify which items that the seller will be responsible for, and the items for which the buyer will be responsible. Time dead- lines such as the buyer’s time to inspect the aircraft, time to deliver documents to escrow, and closing time to fund and close on the aircraft must be included in the contract. One of the issues that may be over- looked by a buyer is the tax considerations. In the US, cer- tain states do not impose sales tax on the aircraft purchase. The buyer may seek to close in a tax friendly state. Outside of the US, some coun- tries impose high luxury or im- port taxes. In such cases, the Elisabeth D. Kozlow, Shareholder at Siegfried Rivera Law Firm (Florida) Tel: 305-442-4938 | www.srhl-law.com Elisabeth D. Kozlow, Attorney and Shareholder at Siegfried Rivera Law Firm speaks about aviation transactions and how selling and purchasing aircrafts differ from more typical items of property and the importance a strong contract plays during the process. Elisabeth D. Kozlow Elisabeth D. Kozlow practices in the areas of Aviation Law, Shopping Center and Leas- ing Law, Construction Law and Corporate Law and per- forms general Commercial Transactions. She also pro- vides corporate consultation to many of the firm’s con- struction clients. At Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, P.A., we have pioneered a uniquely personalized way to prac- tice law. Their legal teamand support staff have extensive experience in all aspects of construction law, condo- minium association matters, homeowners and commu- nity association law, real es- tate, and corporate law. buyer should consider regis- tering the aircraft in a more tax advantageous jurisdiction than their home country. The US has trust structures that can be used by a non-US citizen to register the aircraft under the US Registry. All the above considerations should be evaluated before the buyer executes an aircraft purchase agreement. LM