At the last moment today, the FAA announced that the registry would be closed on December 24, 2012.
But we had a closing! What do we do?
In the last week of the year we often receive calls from clients that have just determined that they need to close on the purchase or sale of their aircraft by year end. Sometimes these transactions even pop up a day before New Years, sometimes Christmas Eve.
Many times clients are under a mis-impression about what it means to “close”. For example, we often hear “but the FAA filing window is closing in 5 minutes and we won’t have submitted our bill of sale to the window by then” or “there’s just no way we can get our documents to Oklahoma City by Friday”.
Of course, the most conservative approach is to have your local counsel or title company run a search of FAA and International Registry records for liens immediately before dating and submitting your bill of sale and registration application to the FAA at the window. But what if title must under any circumstances transfer on a day that the FAA is closed?
It may surprise you that the effectiveness of a transfer is not governed by Federal law or FAA regulations. The effectiveness of a transfer is governed by State law. When is there an effective sale or transfer? The State law that governs sales of goods is the Uniform Commercial Code in nearly all jurisdictions, and the UCC has provisions about what makes an effective “sale.”
First, for goods in excess of $500, there must be a contract in writing that specifies the quantity of goods to be sold. The Florida UCC also provides that “Unless otherwise explicitly agreed, title passes to the buyer at the time and place at which the seller completes her or his performance with reference to the physical delivery of the goods.…” Typically, your purchase agreement will explicitly provide when title passes, for example upon the dating of the FAA Bill of Sale (or Warranty Bill of Sale) and delivery of the bill of sale to the Buyer (or release to the escrow agent on behalf of the Buyer), which is typically authorized after funds are paid and the delivery receipt executed.
A bill of sale should contain text to implement the conveyance as well as the names of the parties, price or consideration being paid (price is typically found in the purchase agreement and that’s fine), description of the good being sold, and the date.
So, let’s say that we must close on Christmas Eve and the FAA just announced they’ll be closed. Can you still effectively transfer title to the aircraft and close your transaction? Of course. If the bill of sale is dated and delivered to the buyer, and the other requirements set forth in your purchase agreement for title transfer are complete, your transaction is closed. And what if you don’t get that done on Christmas Eve, can you do it on Christmas Day? The law doesn’t take a holiday. The same rules will apply.
The foregoing assumes of course that the parties are comfortable with the lien and registration status of the aircraft (perhaps searches were done very recently).
We wish you a happy and healthy New Year and look forward to serving you right up to December 31 and again in 2013.