How Does Escrow Work when Selling an Aircraft?

Setting up an escrow arrangement when selling an aircraft is a common practice to ensure a secure and smooth transaction for both the buyer and the seller. Escrow provides a neutral third party to hold funds and documents until all conditions of the sale are met.

Choose a reputable escrow agent or company that specializes in aircraft transactions. It’s crucial to work with a trusted and experienced entity to handle the financial aspects of the deal. You can find escrow agents through aviation lawyers, brokers, or industry referrals. Once you’ve identified the escrow agent, negotiate and agree upon the terms of the escrow arrangement. These terms should be outlined in a written agreement, often referred to as an escrow agreement.

Determine who will pay the escrow fees, and clarify whether these fees are flat or based on a percentage of the transaction amount. Specify the escrow account where the funds will be held. This account should be separate from the agent’s operating funds. Outline the conditions that must be met for the funds to be released to the seller. This may include verification of aircraft condition, title transfer, and other contractual obligations. Establish a process for resolving disputes if any issues arise during the transaction. The buyer typically provides an initial deposit to the escrow agent. This deposit demonstrates the buyer’s commitment to the purchase and secures the aircraft while the transaction is being finalized. Both the buyer and seller should provide the necessary documentation to the escrow agent. This documentation may include Aircraft title and registration documents, Bill of Sale, Maintenance records, Purchase agreement, Inspection reports. The escrow agent will review these documents to ensure that everything is in order.

The buyer usually has the opportunity to inspect the aircraft to verify its condition and compliance with the purchase agreement. The escrow agent can coordinate this process.Once all conditions of the sale have been met, the escrow agent will release the funds to the seller, and the necessary documents will be transferred to the buyer. The closing process involves signing the final paperwork, transferring the title, and completing any other required steps. The escrow agent can facilitate this process to ensure a smooth transition. After the sale is completed, the escrow agent may provide a closing statement detailing the financial transactions involved in the sale. If any issues or disputes arise during the process, the escrow agent will follow the dispute resolution process outlined in the escrow agreement. Once any disputes are resolved, the funds will be released according to the agreement. After all funds and documents have been transferred, and the transaction is complete, the escrow agent will close the escrow account and provide a final report.

Using an escrow agent when selling an aircraft adds an extra layer of security and ensures that both parties fulfill their obligations in the transaction. Be sure to work closely with your chosen escrow agent and legal counsel to ensure a successful sale.