Title Insurance_FinanceSept 18/09/2012 11:37 Page 1
TITLE INSURANCE DON’T RISK LOSING YOUR AIRPLANE FOR LACK OF TITLE INSURANCE.
Title Insurance Insuring aircraft against title pitfalls. by Lori Johnson hen most people make a real estate purchase, they automatically purchase title insurance on the property to ensure that there is someone who will support their rightful claim to the real estate title. When it comes to aircraft purchases, though, some people are unsure of the necessity of title insurance. Title experts in the aviation industry say close to 30 percent of pre-owned aircraft available today have some sort of cloud surrounding their titles. Owners have lost their aircraft, or had to pay the legal fees to defend their title claim. Purchasing aircraft title insurance is the only way for aircraft owners to know for certain that they are best protected from financial loss and legal problems regarding the title of their aircraft.
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WORLD AIRCRAFT SALES MAGAZINE – October 2012
WHAT DOES TITLE INSURANCE DO? Like real estate titles, aircraft titles can be affected by record errors, unresolved liens, or even fraudulent activity. Unlike real estate, though, aircraft are mobile assets. This mobility brings along another set of potential issues. If an aircraft’s title is rendered unenforceable, the aircraft owner faces the potential of losing the aircraft or being sued for previously existing liens or unpaid taxes. Tracey L. Cheek, Vice President of Aircraft Title Insurance Agency, Inc., outlines “There is a very common belief in the industry that a ‘clear title’ at the Federal Aviation Administration (FAA) means that the buyer owns the aircraft, the lender has a first-priority lien against it and that no third party can or will claim any further interest www.AvBuyer.com
in the aircraft. This is often a true statement, but not always. “Legal ownership and lien enforceability are determined by applicable state law. It is possible for a third party who is not listed in the FAA records and who has no interest registered at the International Registry to show up and prevail in asserting a claim against an aircraft.” If a claim is asserted, Cheek warns, whether it is valid or not, the owner or lender is obligated to pay the legal fees to defend his or her title. Stephan Asper, Senior Vice President of Marketing for AIC Title Service, LLC, says that aircraft title insurance is designed to indemnify aircraft owners against many losses that are not, and cannot be found in a search of the FAA records. “The insurance protects, as applicable, the buyer’s and/or ❯ Aircraft Index see Page 4