I plan on discussing with legal-but wanted to throw it out there for the peanut gallery. The plane I would like to make an offer has a 20 year old small mechanics lien against it. I had an old surprise lien on a prior plane so I’ve had to deal with removing one before, kind of a PITA. Obviously I want the plane title clear before purchase if possible. The seller states they have filed the paperwork a couple of months ago, but I know the FAA moves at their own pace-and the lien is still recorded as of yesterday. Would you be comfortable with documentation of the appropriately filed paperwork, or would you require the lien clear before purchase-which from my understanding can be expedited by third party firms? I’m not financing the purchase so it’s not an immediate issue-but I know it can be problematic for future transactions. TIA
Lien question
- Thread starter KYPilot
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I would ask an aviation title company or lawyer what they think and try for that expedited review.
If asked to review, I would look at all the paperwork including the full title, the lien in question, and what the seller submitted and make a recommendation to my client. Aside from that, this SGOTI has no opinion on the subject.
If asked to review, I would look at all the paperwork including the full title, the lien in question, and what the seller submitted and make a recommendation to my client. Aside from that, this SGOTI has no opinion on the subject.
The legitimacy of the seller is no guarantee of anything.
Bear in mind that the legitimacy and enforceability of a lien is a matter of state, not federal, law. That's especially true of mechanics liens. So exactly what was filed needs to be reviewed by someone who knows exactly what they are looking at.
luvflyin
Touchdown! Greaser!
Ok. Here’s what I said in case anyone is interested. I’m still wondering what TIA means.
“I’d be ok with it if I was anxious to get the deal done and get the plane. Is the entity that put the Lien on still around anywhere? 20 years is a long time. I dunno, but it seems there should be some kind of statute of limitations kinda thing about a Lien that old. What does TIA mean?”
“Thanks in Advance”
Ventucky Red
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Jon
I just went through this whole process, but the lien was for a loan from a family member to another family member to buy the plane, and then the plane was refinanced with a loan from the bank... someone forgot to send the FAA 8050-41 when they did the reconveyance at that time - another reason to use an escrow or a bank that understands aircraft loans and the FAA.
https://www.pilotsofamerica.com/community/threads/cloudy-title.141313/
We went with a title/escrow company that offers title insurance. I picked up the escrow service and the seller bought the title insurance. We were able to get the most recent lien cleaned up and there is an endorsement on the policy that specially states the outstanding lien in question.
The escrow agent put me in touch with the title policy underwriter and she told me these are not uncommon occurrences. She stated that it is a good idea to check your title every so often... she had a couple of instances where the wrong N number was used in the lien filling which was a total surprise to the seller when brought to their attention..
There are definitely limits on enforceability. Depending on the state, it might have been unenforceable 20 years ago
. It's not uncommon for mechanics lien laws to require the claimant to take affirmative steps to foreclose on the lien within a fairly short period of time (in Colorado it was 90 days) or the lien automatically terminates. That's why the paperwork is so important to determine what is there and what needs to be done to formally correct it (or pass the issue on to future purchases. My weirdest one was my first. Fifteen year old loan that was paid off but never released. With some research, I knew it was invalid, but that's wasn't going to satisfy a new buyer or their finance company. They wanted it cleared. What made it weird was that the bank having the lien used the wrong bank name so, even after tracking the merges, acquisitions, etc to the latest successor bank, they wouldn't touch it.
If you use an escrow company anyway, the main part of their job is to verify that the buyer will have good title before the money goes to the seller. That's what an escrow is - have all the conditions for the seller to get paid been met?
They will see the lien and understand what it is. They will know what is needed to clear it and whether the seller's paperwork is effective to do that. If it is, they can probably find out if it was filed; if not, they will ask for a duplicate set so they can file it.
They can clear many things. The catch is when there is something on the record that they can't clear without using a lawyer licensed to practice in the lien state. That first one I mentioned? That was the situation. The title company found the problem, passed the problem back to my client (the seller), and he retained me to fix it.
Thanks for the explanation-I was under the incorrect assumption the escrow services ONLY handled payment issues and the title services were separate.
Don't misunderstand. I don't know their pricing practices but unless I didn't care about have clear ownership, I can't imagine doing a property transfer escrow that doesn't include determining whether there is clear title. But the result of that can simply be, "there's an undischarged lien on the record. What do you want to do?"
What you choose to do at that point is up to you, your seller, and the purchase contract. If your choice is, I want the airplane and I want clear title, I would expect someone to pay for that. Might be you. Might be the seller. Might be shared. All depends on the deal between the buyer and seller.
I bought a 172 that went through 5 owners and 42 years with an outstanding lien.
The bank would acknowledge it was cleared but would not release. They sent papers to take to the Department of Motor Vehicles!
An attorney was no help. A retired bank manager really helped. He told me the exact words to use when dealing with the bank. Far worse than an IRS audit as it could shut them down regarding loans.
My take is nearly half of the aircraft I’ve bought have liens paid off but not released. Most common is when buyer knows and trusted seller.
The bank would acknowledge it was cleared but would not release. They sent papers to take to the Department of Motor Vehicles!
An attorney was no help. A retired bank manager really helped. He told me the exact words to use when dealing with the bank. Far worse than an IRS audit as it could shut them down regarding loans.
My take is nearly half of the aircraft I’ve bought have liens paid off but not released. Most common is when buyer knows and trusted seller.
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Like everything else, the attorney has to know the system to be effective. In the messiest title issue I handled, was not a lien but the FAA rejecting the application for registration due to a break in the record ownership. Another lawyer tried to clear the problem for a year before they brought me into the picture. The other lawyer was not only competent; he was very good. But he didn't have the type of experience to solve the problem. We worked together and had the solution in a few weeks.
in the one I mentioned earlier, it was a lawyer-to-lawyer conversation that led to a solution.
The real point is, there is no one size fits all solution and experience counts. All the ones I see are problems. Fortunately they were within my area of competence based on experience, not on some native "brilliance." Same issues 20 years earlier and I would have been clueless (plenty of people think I still am; I"m often forced to agree with them).
Ventucky Red
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Looks like the smart move, since I’m going to use an escrow company anyway-would be to use somebody like AIC-and they could handle the title issue also if needed[/QUOTE]
Ace66
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Resurrecting this thread rather than create a new one. I'm buying an old plane with a lien from 1946 still on the FAA's books. I believe the bank is no longer in business - it may have merged. The current owner bought the plane in 1947. Any suggestions? Bank is/was:
Bankers Commercial Corporation
270 Madison Avenue, New York, NY
in the 1960's another business started up in CA with that same name. I don't think they are related.
Also, any answers to wsquare's question above?
Bankers Commercial Corporation
270 Madison Avenue, New York, NY
in the 1960's another business started up in CA with that same name. I don't think they are related.
Also, any answers to wsquare's question above?
Skymac
Pre-takeoff checklist
I wouldn’t mess with it unless the lien was cleared or it was a plane I knew I’d have until I passed. In some situations where a bank has went out of business, that wasn’t a big deal.
However, I knew of a plane that had a lien and the mechanic that filled the lien had passed away. A prospective buyer did the right thing and asked the family if they would release it, and they didn't even know the several year deceased mechanic even had a lien on any airplanes. It was around 8,000 I believe. The prospective buyer even offered them $1,000 and they wouldn't budge.
However, I knew of a plane that had a lien and the mechanic that filled the lien had passed away. A prospective buyer did the right thing and asked the family if they would release it, and they didn't even know the several year deceased mechanic even had a lien on any airplanes. It was around 8,000 I believe. The prospective buyer even offered them $1,000 and they wouldn't budge.
Where to look up. cares.faa.gov. But that assumes you will understand what you are looking at. Best bet is typically someone who will understand and analyse.
with an lien that old, it's probably unenforceable but that might or might not satisfy a potential buyer.
Ace66
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How does this help me? Should I put an ad in the newspaper classified section, "Calling all retired Bank Managers...."
Ace66
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Thanks for this link. This would have saved me $105 for the title search since it looks like all the info they sent me is from this website!
k9medic
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Contact AIC and have them do your title work. They will track down the folks for the lien. Worse case, they will do a "quiet title" process with the courts which will take care of the lien.
I have used them for several aircraft purchases.
I have used them for several aircraft purchases.
It may not have been "from" this website (which only went live several months ago) but it is the same data source,
Ace. Quite likely you do business with a bank.
The Manager would be familiar with NY Banking Regulations.
Is the lien paid off but no released? That is very common.
The Bank that issued the lien gets nothing for releasing it.
Prodding them to do what they are required to do with words
not known to you or an attorney but known to those in the banking
business can work wonders.
The Manager would be familiar with NY Banking Regulations.
Is the lien paid off but no released? That is very common.
The Bank that issued the lien gets nothing for releasing it.
Prodding them to do what they are required to do with words
not known to you or an attorney but known to those in the banking
business can work wonders.
Pinecone
En-Route
AeroSpace reports do the same thing. And I have had good luck with them for 2 transfers.
Ace66
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AeroSpace sent me to a lawyer for a Quiet Title process. $4800 to get started.
Learned something new - insurance companies don't run title searches when you bind a policy with them. If there's a claim, then they run the title search and cut a check to the policy holder AND any lienholders. If the lienholder is no longer around, then you can't cash the check! I have no idea what requires them to cut a check to any lien holders. It's the policy holder that bought the policy and who the insurance company is beholden to - not any lienholders. The aircraft owner is beholden to the lienholders.
Ace66
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Again...you're not helpful. Are you going to post the "magic words" that strikes fear into the heart of every banker or are you going to continue speaking in tongues like a mystic?
The financial institution was likely not a bank, was never registered with the FDIC, and is untraceable.
Ace66
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The "bank" actually repossessed the plane in 1946, filed an affidavit but not a release of conveyance, and then sold the plane with a clean BoS. In everyone's mind this plane is free and clear, everyone except the insurance company who says they'll cover the plane but any claim checks will have the lienholder on it. This is absolutely mind-boggling. I don't want to buy it if I can't get insured and by insured I mean I can actually cash the checks they may send on a claim.
The insurance company I'm working with is Avemco. My regular broker doesn't know a thing about this.
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The laws relating to secured transactions gives a prior lien priority. From the insurer's standpoint, it's a simple desire not to pay twice on the same claim.
I'd try another carrier. But ultimately, it might need to be cleared. The title companies can help a lot, but sometimes it needs a lawyer. The first two things are to review all the paperwork to see what the words say and see if the lienholder can be traced to an existing entity. Sometimes simple. Sometimes not.
Technically, it's your seller's problem (no clear title), but if you want the airplane it becomes yours.
Pinecone
En-Route
It is the same for your house and your car insurance. This is why lien holders REQUIRE insurance. And why they get paid first.
Otherwise, they have no hold over you if the asset is destroyed.
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