Newspaper article THE JOURNAL RECORD

Role of the FAA Registry in Aircraft Transactions

Newspaper article THE JOURNAL RECORD

Role of the FAA Registry in Aircraft Transactions

Article excerpt

Air travel is expected to continue to rise during the first several years of our new millennium. To meet the increased demand in air travel, we will see continued growth in commuter and regional airlines, and corporate, private and fractional aircraft ownership.

Chances are you may find yourself involved in an aircraft transaction -- whether as buyer, lender, lessor or lessee. A few basic facts about the legal framework of aircraft ownership, financing and leasing, and the role of the FAA Registry in such matters, can help you get the right start in any such transaction.

Anyone can own an aircraft, but in order to legally operate the aircraft, the aircraft must be registered with the Federal Aviation Administration Aircraft Registry, which is located here in Oklahoma City at the Mike Monroney Aeronautical Center.

Registration of aircraft is governed in part by the FAA Act, a set of federal laws enacted by Congress. Under the FAA Act and federal regulations, an aircraft may be registered only in the "legal name of its owner."

The owner must qualify as a U.S. citizen, as defined in the federal FAA Act.

The definition of U.S. citizen in the act is not unusual, but differs somewhat from the common-sense definition that would normally come to mind.

If the proposed ownership structure involves entities or individuals who do not qualify as U.S. citizens under the act, then there are FAA-approved structures designed to accommodate such ownership, while remaining within the parameters of the FAA act.

There also are limited exceptions to the citizenship requirement.

In addition to registration of aircraft, the act also created the FAA Registry, which is charged with establishing a system for recording instruments that affect interests in civil aircraft (and interests in engines and propellers over 750 horsepower).

The FAA Registry maintains records on aircraft (similar to county land records) that can be reviewed to determine the current registered owner of an aircraft and any existing liens or encumbrances on the aircraft. (The FAA Registry does not, however, maintain ownership records on engines and propellers.)

The FAA Registry serves as the filing location for most legal instruments affecting title to or an interest in aircraft and preempts the UCC as to where to file such instruments. As a result, any such instrument -- bill of sale, security agreement, lease -- must be recorded by the FAA in order to "perfect" the rights of the parties in the aircraft.

State law determines the validity of the instrument and priorities of the parties who claim rights to the aircraft, but in order to perfect such rights, the instrument must be recorded by the FAA.

The FAA Act, as originally enacted by Congress, was intended to serve as a "central clearing house" for all interests in aircraft.

The idea was that anyone involved in an aircraft transaction could go to one location -- the FAA Registry in Oklahoma City -- and find a listing of all interests in the aircraft. …

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