Purchasing Aircraft Title Insurance
When it comes to real estate transactions, most consumers are aware of the importance of purchasing title insurance
. Purchasing aircraft titles, however, often involves just as much risk as land title transactions, and purchasing aircraft title insurance protects aircraft owners from a wide range of title fradulence, record errors, preexisting liens and other title encumbrances.Why do aircrafts need title insurance?
Like land titles, aircraft titles are subject to record errors, unresolved liens and even fraud. There are a large number of reasons aircraft titles may be rendered unenforceable, placing the aircraft owner at risk of property loss or being sued for previously existing liens or unpaid taxes. As the first step in acquiring aircraft title insurance, aircraft title insurance companies will draft an aircraft "title opinion", or "title abstract" based off a thorough investigation of the aircraft titles chain of ownership.
The purpose of the initial aircraft title search is to unearth any problems with the aircrafts title and, if necessary, resolve them before the sale closes.
Problems commonly associated with aircraft titles include:
Unreliable FAA title records. Although the Federal Aviation Administration requires that all aircraft titles be registered and recorded through the FAA, FAA title records do not have final legal authority in determining rightful aircraft title ownership. Similarly, aircraft title Certificates of Registration and FAA Registration do not have ultimate authority in determining aircraft title ownership. If there are any reasonable disputes made regarding rightful aircraft title ownership, only state courts have the final word.
Title fraud. Aircrafts which originated from another country are difficult to trace, and even though an aircraft title appears to be legitimate, the aircraft seller may have forged the deregistration notice. Buyers of stolen aircraft titles are still entitled to liens attached to the aircrafts title, even if those liens are international. Aircraft titles can also be defrauded by being re-sold to another owner before the first buyer has the chance to file a security agreement with the FAA.
Recording mistakes. Clerks and even title lawyers make mistakes from time to time. FAA records can be misinterpreted by the aircraft title insurance underwriter; document creation, registration and filing mistakes can be made by aircraft title agents, aircraft brokers, escrow agents and title attorneys. Inaccurate or improperly filed title information can lead to inaccurate aircraft title abstracts.
Unpaid taxes or liens. A new aircraft owner is held responsible for any and all unpaid taxes, mortgages or other liens held on an aircrafts title, even if they were incurred before the purchase was made.
Although title opinions or title abstracts are typically presented to an aircraft broker or buyer before ownership is transferred, not all problems with the aircraft title may surface in the initial abstract.
How does aviation title insurance protect me?
Although aircraft title searches and abstracts are designed to preemptively protect aviation title owners from asset loss or legal attacks on the aircrafts title, human error and hidden fraud still present a risk to the owner. Purchasing aircraft title insurance is the only way for airplane owners to know that they are fully protected against legal problems or asset loss.
Aircraft title insurance protects airplane owners by providing the cost of legal defense in the event of a title lawsuit. Aviation title insurance also insures the aircraft title owner compensation of any financial or property loss due to title disputes, up to a specified amount. At the cost of less than 1% of the purchase amount, aircraft title insurance is a necessary commodity for aircraft owners.
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