AVIATION LAW ARTICLES
- Group Ownership / Shared ownership - October 2006 edition of Flyer magazine
- Importing an aircraft - June 2007 edition of Pilot magazine
- Importing an aircraft - July 2007 edition of Pilot magazine
- Legal eagles Ian Gee and Ajay Wiltshire guide us through the minefield of buying an aircraft - October 2007 edition of Flyer magazine
- Pre-flight: before you start up your pride and joy, consider the law… -July 2008 edition of Instrument Flight
Published in the October 2006 edition of Flyer magazine, copyright and not for reproduction
Group Ownership / Shared ownership
As light aircraft are relatively expensive to buy, yet enjoy much lower utilisation than cars, it makes sense to spread the cost of purchase and ownership around a like-minded group of people. FLYER asked solicitor and qualified commercial pilot Ian Gee of JWK Solicitors, an expert on the subject, to give a rapid run through the basic requirements and considerations:
‘The basic rule for group ownership is that no member of the group can be a limited company and each member must hold not less than a five percent share. One important decision for the group is whether to operate as a limited company itself, in which case the number of shares and the procedure for voting decisions must be established.
Whether the group operates as a limited company or not, there is still a long checklist of questions to be completed. First, the fundamentals; at which airport the aircraft is to be based? What will be the minimum requirements for prior flying experience of members and currency? What level of insurance is required (e.g. amount of cover, excess and geographical area to be covered)?
When you have purchased the aircraft you may have to buy additional equipment and you will certainly have to pay for maintenance – so you will have to decide on the amount of authority for capital expenditure, authorisation for repair.
To make sure everybody has their fair share of flying time, you will need to establish a booking system that allows separation between bookings and sets maximum periods – and if a member has not turned up by a certain time/notified delay, the presumption is that the booking is cancelled. The rates for flying charges will have to take into account much more than the simple, direct costs – especially if it is intended to build up reserves for spares and, ultimately, an engine change. You will also have to decide on delegation of responsibilities for bookings, financial dealings, cheque signing, arranging engineering, etc.
In time, group members will, for a variety of reasons, move on. So how will you sell shares – do the other members have first right to buy, and is there to be a minimum price? You hope it won't happen to your group, but you should allow for default by a member, suspending flying if payments are overdue and setting up a mechanism whereby a share can be compulsorily sold.
Equally, you need a procedure for resolving disputes and ending the agreement/sale of the aircraft.'
Some owner groups work on a remarkably informal basis, but others have run into damaging and terminal disputes that might have been avoided through better planning and the drawing up of a formal agreement.
Published in the June 2007 edition of Pilot magazine, copyright and not for reproduction
Importing an aircraft
Every month we assemble a fresh panel for the series that tells it like it is. This month’s experts…
As well as being a skilful pilot, Andy has just about every kind of engineering licence. He has maintained a range of newly-imported aircraft and is familiar with the process for getting them G-registered.
A solicitor with a CPL/IR from Jobling & Knape, which acts in aircraft transactions, provides an escrow service and also has a solicitor who worked for international law firms in Belgium, France and Russia.
Proprietor of Yak UK and Gransden airfield, has been the principal importer of light aircraft from Eastern Europe since the collapse of the Iron Curtain, including jets, tourers warbird and aerobatic types.
MD of White Rose Aviation, a company that specialises in providing overflight and landing permits worldwide. In aviation for 30 years. Has helped many pilots importing Permit aircraft and long-distance pilots.
If you are looking around for a second-hand aircraft to buy, the UK’s relatively small used aeroplane market can be rather frustrating. If the aircraft you want is unusual, like, say, a reproduction Fokker Triplane, you can wait years for one to come up for sale. Even if the aeroplane you want is more common, such as a four-place Piper retractable, you can look at the handful that are on the UK market only to find that none is suitable.
The available choice becomes much wider if you look abroad.
If the currency exchange rate is favourable, used aeroplanes can be much cheaper than in the UK, so, for instance American aircraft look very keenly priced to British eyes at present.
Altogether, buying an aircraft that is registered in another country can seem very tempting. However, importing a used aircraft is often more complicated than buying one in the UK, and there are many pitfalls to avoid. The old adage of buyer beware still very much holds true.
In this first instalment we deal with importing aircraft from Europe intended for use on a CAA Permit to Fly. Next month we will look at buying all other kinds of used light aircraft from America and Europe. If you want to look further afield, the two instalments will provide a basis for shopping just about anywhere – there are bargains to be had, for instance, in Australia and New Zealand, India, China and South America. However, most imports come from North America or Europe.
Permit to Fly
There are a whole variety of different aircraft that can technically qualify for a CAA Permit. These range from microlights and homebuilt aircraft to Eastern bloc aircraft like Yaks, Sukhois and Antonovs. The latter were designed as military aircraft and, consequently, are classed as ex-military by the CAA. This means they can’t have a Certificate of Airworthiness, only a Permit to Fly. Since they are not on the Popular Flying Association’s approved list, they also have to be maintained directly through the CAA, or by agreement with an A8-20 organisation and not through the PFA. (Microlight aircraft should be referred to the British Microlight Aircraft Association.)
Persuading the CAA to grant a Permit to any imported aircraft (not just ex-military types) can be a way to get it onto the British register if a full C of A isn’t possible and the PFA won’t take it on. This route has been used successfully in the past for specialist aerobatic types, reproduction warbirds, classics that are no longer supported by a manufacturer, and other unusual one-offs or replicas. However, buyers ought to be aware that the EASA rules now affect this policy. Only aircraft that fall within Annex II of the EASA Regulation (1592/2002)remain subject to UK National policy. For other aircraft, the situation in Europe is still under review and, in fact, EASA has its own permit system for some types.
Compared to operating aircraft on a C of A, operating on a CAA Permit doesn’t make as much difference as you might think. Maintenance procedures are usually set out by manufacturers, and they are not all that different from the procedures for keeping a Piper or Cessna on aC of A airworthy. If there aren’t any set-down procedures, then some form of maintenance will still be required and, in most cases, the Light Aircraft Maintenance Schedule (LAMS) can be applied.
You are still required to hand your Permit aircraft over to a maintenance professional once a year, although you can still do as much of the work yourself as a qualified engineer is willing to supervise and sign for. You still need to carry out the 50-hour/six-month LAMS checks, if appropriate. Unless the aircraft falls under the provisions covering ex-military types, and so requires the oversight of an A8-20 organisation, the rules are relaxed in that there is no requirement for the maintenance company to be approved, which means that maintenance can be carried out at your workshop or hangar (with landlord approval) by an independent engineer, providing that he is authorised by the PFA or other approved organisation, or by the CAA, for that permit aircraft. Certain pilot maintenance provisions may also be allowed.
Operating on a Permit carries with it restrictions and means that you cannot fly over built-up areas, in IFR (without exemptions) or at night. Nor can you fly for hire or reward except display flying. Of particular significance for importation, you have no automatic right to overfly foreign territories and must apply to the national airworthiness authorities in advance. Permission is usually a formality, but you don’t want to arrive to ferry your aeroplane home and find the route barred for a week because you didn’t apply for overflight permission. The permissions on overflight are slightly different for homebuilt aircraft. Think ahead.
Book your space
It may be stating the obvious, but you will have to keep the aeroplane at an airfield. Finding space can be very difficult for parking outside – even more so if you want to keep your aeroplane in a hangar.
In some crowded parts of the country it can take months to find an airfield prepared to take another aeroplane.
Third party insurance is mandatory for the ferry flight. The best advice is to avoid delays by having it set up in advance of the transfer of ownership. Most brokers will issue a certificate, which you can then activate by telephone. Evidence of insurance must be sent to the Aircraft Registration section of the CAA prior to any flight being made. This can be sent by fax (020) 7453 6670 or e-mail email@example.com.
The safest route is to employ an escrow agent as an independent third party. He will hold your money and the vendor’s aircraft title documents and only exchange them when both parties are happy. This arrangement safeguards you against any outstanding payments that may be due on the aircraft. Escrow agents will also advise you on the vendor’s title to the aircraft – whether it is really the vendor’s to sell.
A riskier process is to make the deal directly. A banker’s cheque is one way to pay, but with high denomination Euro notes available (so a large sum doesn’t have to be bulky), there is also an option to pay in cash, which has the virtue of simplicity. Send a facsimile of the banker’s cheque in advance to make sure it’s acceptable to the vendor’s bank. Again, this is something to set up in advance. Be clear beforehand if the vendor is VAT-registered and has included VAT in the price. If you’re not VAT-registered yourself (and cannot reclaim the VAT) this can come as an expensive surprise. VAT rates vary in different European countries. You must pay any VAT duty that is due in order to ensure free circulation of the aircraft within the EU.
Some countries can be quite vicious if they catch you with large quantities of cash on your person.
In France they will confiscate anything over 5,000 Euros and issue a fine on the spot. In Lithuania you have to declare it if you have more than 10,000 Euros when you enter the country, but you are allowed to keep the cash and there are no fines.
Scams and fiddles
Some vendors might ask you to pay cash into their offshore accounts – in which case, beware in case you are getting involved in money laundering.
An escrow agent will ensure that the owner is the owner, rather than his bank, but he cannot ensure that there are no outstanding bills on the aircraft to be transferred to you, the new owner. Even in the UK it is not possible to register liens in the Register of Aircraft Mortgages. So be wary: an unpaid supplier such as a maintenance company can prevent you removing the aircraft, even though you paid for it.
Unscrupulous vendors have been known to switch engines and other high-value items between your initial inspection and when you come to fly the aircraft away. When you first inspect it, make a note of serial numbers and write them into your agreement. If you can’t inspect the aeroplane prior to shipping, get someone else to do it.
A written contract drawn up by a local lawyer or a firm of solicitors based in the UK with international experience is definitely the safest course. You should seek the vendor’s agreement to the contract being subject to your legal jurisdiction – if there is a dispute, then you would want it determined in the UK rather than abroad.
A UK JAR-FCL pilot’s licence is valid anywhere in Europe and a lot of countries will accept a UK PPL.
If the aircraft has a Permit to Fly or C of A for the country within which it is registered and you have obtained the relevant overfly permission, you are free to ferry it to the UK. If you are paying someone to undertake the ferry flight, it is recommended that you check with the relevant State licensing authorities if anything additional is required.
Your application will be considered first of all by the CAA’s aircraft certification office at Gatwick. This costs £632 (but see below), and is to verify that the aircraft is what it purports to be and not some kind of impostor. This includes checking that it has the correct major components listed by the manufacturer, that required mods have been done and that any component lives are not exceeded. The basis for the CAA’s acceptance of the aircraft is normally that it is a recognised type from a recognised manufacturer, even if it is long out of production or the manufacturer no longer exists. Where the aircraft is an ex-military type, there will also be a need to evaluate the service history of the type to make sure that it is not unsafe. The Gatwick office then issues a draft Airworthiness Approval Note, which defines the aeroplane’s build status and will list any modifications or individual differences.
Your application is effectively signing a blank cheque (although there is a top limit… of £59,000!) because the CAA charges its surveyor’s time at around £130 an hour. Usually, though, the additional charge isn’t for more than four hours. This is spent going through the aircraft log books, the build standard and modification status, plus time with your licensed engineer going through directories, ADs and other documents when the time comes for the Permit to be issued.
Permit or C of A
If the CAA believes that an aircraft is still supported by a manufacturer, it will insist that you apply for a full C of A. This may bring the aircraft into either the national regime or that of EASA. This won’t necessarily increase your bills though, as a first UK C of A is less rigorous than a first Permit because the design review and investigation (the Type Certification) has already been done. There may be AAN charges if you have something special fitted above the standard build.
The safest thing is to check with the CAA first.
You can save a couple of weeks by carrying out the CAA flight test schedules while the aircraft is still on the register of its country of origin, but check first that this is acceptable since the CAA exemption may not cover flight test. This avoids the intermediate step of a Permit to Test and enables the engineer to go straight for Permit to Fly. However, should the annual inspection require anything major, e.g. engine or prop change, the flight test may have to be repeated.
The last step in the application process is a visit (no further fee!) by a CAA surveyor from your local office. Following a successful survey – which samples the aircraft and all the paperwork and documentation supplied by your engineer – a full Permit to Fly will be issued.
Unapproved modifications can be a major cause of delay and unforeseen expenditure. The importer who, for instance, has a propeller or engine that hasn’t been evaluated before by the CAA will have to show that it is manufacturer-approved. Suppose it isn’t, or you can’t prove that it is? Even if dozens of similarly-equipped aircraft have been flying for decades in the country of origin, you will have to choose between two evils. The first is expensive replacement with an approved substitute, the second a time- and money-consuming application for a Major Modification.
In the UK
You can fly your newly acquired aeroplane on its country-of-origin registration and Permit, with a CAA exemption if necessary, for 28 days in any given year. A European registered homebuilt can operate in accordance with CAA Airworthiness Notice No.52. However, you would be very ill advised to put off the application for a G-registration (which costs £60 or £220 if selecting an out-of-sequence registration mark, because the importation process can easily take several months if you are not prepared. Reserve or have a registration allocated to you but don’t cancel your foreign registration until the end of the importation process, when a CAA surveyor has given a definite date for his visit.
If you have made application for a Permit to Fly and have paid your money, the CAA may consider issuing an exemption in exceptional circumstances, but it is not automatic. If granted, this will entitle you to go on flying the aircraft while the paperwork and bureaucracy amble slowly to a conclusion. The CAA can deal with your application faster if it is complete and accurate.
Book your engineer
Basically, importing is a matter of handing over the money and flying the aeroplane to where you’re going to keep it – much as with buying from the UK. (The export C of A concept of needing permission to leave never applied to permit aircraft … though in Italy the vendor has to have advertised four months in advance of sale.) However, you need to prepare the ground first and, either through the CAA or PFA, you should make sure that the type is going to be acceptable for a permit application.
Step one is to find an engineer, or PFA inspector as appropriate, willing to take on the application for an initial Permit and maintenance thereafter. The engineer will have to be authorised on type by the CAA, although this may be based in part on a CAA licence, which will involve him in some extra work with his local CAA office and may cause delays, which is why this a good place to start.
Most maintenance companies also prefer to stick to C of A aeroplanes, so don’t be surprised if they say no when you approach them. Others will take you but are often booked for months ahead.
First engineering inspection
Assuming a Permit to Fly will be able to be issued by the CAA, you will need to have your purchase undergo its first annual inspection by an engineer who is authorised on type. He will carry out the LAMS or (far more likely) the manufacturer’s recommended inspection. (You had better make sure for any foreign type that these are available to him in English.) He will also check the ADs and service bulletins pertaining to the aircraft. It is not unknown for these to be listed as carried out in the logbooks, when there is clear evidence on the airframe that the work was never actually done.
As well as replacing or rectifying anything un-airworthy, he will have to replace components that have exceeded the manufacturer’s recommended time limits. Occasionally logbooks on imported aircraft have indicated that hoses (for instance) have been replaced while all that had been done was repainting the end fittings (the giveaway was code numbers under the paint that didn’t match).
A weight schedule will be produced to show that the aircraft is within manufacturer’s weight limits and to enable pilots to carry out a weight and balance calculation before flight. New logbooks are raised for the aircraft, its engine and propeller.
Once all this has been done, the engineer issues a certificate that will validate the CAA issued permit to test fly and a test flight is carried out and a report is issued. Now the CAA Surveyor can inspect the aircraft and, if satisfied, can issue a full Permit.
You should reckon on paying £3,000 to £5,000 for a first Permit for something like a Yak-52; the average cost of subsequent Permits is around £2,000 for this aircraft.
Fix it over there
If the aircraft you’re buying is on the tired side and needs work, you want a new nav/com fit, a zero-timed engine fitted or you want it freshly painted in a new colour scheme you should definitely consider having this done before you collect the aeroplane to fly it home. However, make sure that the equipment to be fitted and its installation are going to be accepted by the CAA. Labour rates in Hungary, Romania, the Czech Republic and elsewhere are half to two-thirds rates in the UK and if you use an EASA 145 approved workshop the work will be to the same high standard as at home.
Published in the July 2007 edition of Pilot magazine, copyright and not for reproduction
Importing an aircraft
Every month we assemble a fresh panel for the series that tells it like it is. This month’s experts…
A sales executive with CSE with 300 hours as a PPL. For a modest percentage fee, CSE imports used aircraft, looking after the whole process, including finding something suitable.
A solicitor with a CPL/IR from JWK Solicitors, which acts in aircraft transactions and provides an escrow service. It also has a strategic alliance with a US escrow agency and a supplier of N-reg and insurance.
Keen aerobatic pilot who earns his living as a farmer. He began importing aeroplanes from America ten years ago and has continued for himself and others, mainly, but not exclusively PFA aircraft.
A pilot since 2000, MD of shipping agent and freight forwarder Big Misters in Felixtowe, has helped customers to import aeroplanes since the mid-80s from Pitts Specials to twins and small jets.
The text of this feature was checked and approved by CAA representatives from the Chief Surveyors Office, Personnel Licensing and Aircraft Registration (via the Corporate Communications Office).
The home of the Wright brothers has much in its favour if you are buying a second-hand aeroplane. Its aviation market is vast, which gives you a wider choice. Classic aircraft and replicas that are rare or non-existent in Europe are plentiful in America. Even if the aircraft you want is something as commonplace as a Piper or Cessna, you are more likely to find the price and level of condition you are looking for. The size of the market also tends to push down prices by encouraging competition. At present the dollar-pound exchange rate is greatly in favour of the pound. Play your cards right and, despite the added costs of importing, you can end up with a bargain by shopping abroad.
You should ideally read this article in conjunction with part 1 in the June issue, which covers the procedure for UK registration and licensing of imported aircraft.
The biggest disadvantage is probably the Atlantic, which somehow or other your purchase has to cross. The next hurdle to consider is transferring your American aircraft on to the British register – although you can fly C of A aircraft on the American register with an American pilot’s licence, at least for the time being. Finally, there is the increased risk of dealing with a vendor long-distance.
Providing you tackle these obstacles systematically, though, there’s no reason why you shouldn’t join the hundreds of UK pilots who have successfully imported used aeroplanes from America.
David Morris, proprietor of Just Plane Trading, was contacted for this article. He used to import second-hand aircraft from America, but no longer recommends the practice. “It always seems to end up costing more in the end than buying a used aeroplane over here. They don’t appear to maintain their aeroplanes as well in the U.S. and there are usually mechanical, engineering and paperwork complications.” You can limit the risks that David is referring to by aiming upmarket and buying an aircraft with low hours.
Like many things in aviation – building your own aeroplane, for instance – importing from America probably isn’t a good idea just to save money. However, if the idea appeals to you and you’re prepared to put in some time and effort, a successful importation can be very rewarding and a real adventure as well.
Finding your aeroplane
Probably the best place to see a lot of American aircraft currently for sale is in Trade-a-Plane, a bright yellow 170-page (or thereabouts) newspaper published in Tennessee, rather like an Exchange & Mart for aeroplanes. You can take out an Air Mail overseas subscription for around £30, or subscribe to the Internet service. See www.trade-a-plane.com.
Go through it with a map of the U.S.A and pick out the aeroplanes that seem worth looking at. You either want a selection within one area that you can get round to see in a hire car, or a selection across several States that you will have to fly to using internal airlines.
Planning your travel
Unfortunately travelling at short notice tends to cost a lot more than if you book well in advance. You can save a small fortune on interstate and intercontinental flights by booking a few months ahead. It depends on what you want to buy, but you might be able to identify an itinerary well in advance, book flights and then find that although some of the aircraft you picked out have been sold, new ones have come on the market in roughly the same locations.
Negotiating with vendors
People who have toured the States looking at aircraft often tell us that they wish they had allowed more time for each visit. Their tip is not to plan on seeing too many aircraft. They also say that many of the aircraft they saw were disappointing and failed to match the vendor’s description – this happens in the UK too. A good general rule is aim up-market rather than go for bargains.
You should pay a local FAA Designated Airworthiness Representative to conduct an inspection for you. (Big Misters Shipping Company keeps a list of DARs.) Ask for a list of identification numbers for major components (such as the engine and propeller) and have them written into the purchase contract to avoid substitution.
Third party help
You will need to find engineers and shipping agents at both ends, legal help for the purchase contract and escrow account, possibly a ferry pilot, an insurance agent and a bank able to transfer payment. Most of these can be found in the Classifieds in Pilot. Seek recommendations from people who have been down the same importation route. Put the word out to as many people as possible. It is most important to get all these agents set up before you go to America. Don’t rush in!
A good DAR will prepare the Export C of A, submit it to the FAA and the U.S. agent for inspection by U.S. Customs. The handling agent will deal with Customs at the UK end and a good one will smooth your cargo’s passage. The agent will also think ahead – for instance arranging a side-loading trailer to facilitate unloading the container.
If you have an American pilot’s licence, you can fly an American aircraft that has an American C of A in the UK more or less indefinitely on its N- registration. You will need to renew your licence every two years with an instructor who has an American instructor’s rating and you will need to have the aircraft maintained by engineers with American ratings. Both exist widely throughout the UK.
Be warned, though, that the FAA has expressed concern about the number of N-reg aircraft in the UK. Quite recently it looked as though N-reg aircraft were all going to have to transfer on to the G-register, but there was such an outcry that the British authorities withdrew the proposal. However, EASA will be looking into this question in future.
At least the C of A is internationally recognised, whereas the Experimental certificate – the American equivalent of our Permit to Fly – is purely national. The Experimental certificate isn’t recognised at all in the UK, whether you have an American pilot’s licence or not – an imported aircraft with one is grounded.
If the Experimental certificate sounds less rigorous than our Permit to Fly, that’s because it is. A great many American Experimental designs won’t be accepted by the PFA or CAA without a full stress analysis and a whole lot of other things you really don’t want to get into.
A good instance of what can happen is when someone imported a Stampe from America a few years ago. The Stampe is classified in America as Experimental, but in Europe it must have a Certificate of Airworthiness (unless it’s a homebuilt replica, in which case it might, stress might, be granted a Permit to Fly). You could be lucky and find a Stampe in America that has its original metric bolts, but many, like this one, had been drilled out for American bolts in a larger size… which meant that every oversized hole had to be filled, re-drilled and fitted with the proper bolts, which are extremely scarce. Some wooden components were scrap, purely because they had been drilled for oversize bolts. If a Stampe or Tiger Moth imported from America has been fitted with American-made flying and landing wires (many are), the wires too will have to be replaced. The total bill can easily end up being more than was paid for the aircraft… and we are talking here about apparently airworthy aeroplanes that were being regularly flown before they were sold.
A roughly similar Hatz biplane, also imported a few years ago, because it is a homebuilt that is recognised by the PFA, was less of a problem. You can get one of those on to the British register with a PFA Permit. (See last month’s ‘Practical Aviation’ for details of obtaining a British Permit to Fly and registration for an imported aeroplane.)
The Federal Aviation Authority (FAA) approves modifications to C of A aircraft that the more sniffy EASA quite often doesn’t. If the Cessna or Piper you’ve bought has go-faster wingtips, a non-standard cowling and a whole load of other improvements you may need to have them all expensively ripped out… unless you’re prepared to go down the tortuous route of applying for Major Modifications.
The same is true for homebuilts like Pitts Specials. Under the Experimental system, builders in the U.S. have vastly more freedom to deviate from the designer’s plans than we do here. Import a homebuilt that doesn’t conform to plans and you’ll either have to make it conform or argue the toss with the PFA.
Staying on the N-register
If your purchase is to be flown post-sale in America, you will have to register yourself as the new owner on the N-register. The same applies if you are going to keep it on the N-register in the UK. However, if you can persuade the owner to make the sale at the port of embarkation and you are planning to put the aircraft on the British register, this won’t apply to you.
If you are not a US citizen or green card holder, you will have to use some form of trust arrangement to register an N-registered aircraft. The trust refers to the legal relationship between you and a special purpose company. The detail is set out in a trust deed.
Your trust provider should be a professional fiduciary or professional services provider – a lawyer or accountant. You should ask to see evidence of a provider’s professional indemnity insurance. You should also enquire as to what contingency plans are in place should the principals of the service provider be unable to act, are sued, die or abscond. Make sure that your aircraft will not be pooled with other aircraft belonging to a third party. Further, satisfy yourself that the trust provider can process your instructions swiftly and accurately and can supply you with all other necessary documentation to keep you flying both legally and safely.
Bear in mind the need to make a search in the International Registry of Mobile Assets, if the aircraft is type certified to transport at least eight persons including crew, or a helicopter for at least five persons including crew.
Ferrying by air
The most common route for light aircraft to fly from America to the UK is via Iceland, to keep the legs relatively short. However, faster aircraft are sometimes flown directly across the Atlantic. Either way, the aircraft will probably need modifying for the journey with long-distance tanks and extra navigation equipment. Flying your purchase across is not a project for the faint-hearted, and most people in this position employ a professional to do it. There are obvious risks, even with twins, in long sea-crossings. However, from time to time a private pilot ferries his own single across the Atlantic.
Ferrying by container
A more frequent solution is to dismantle the aircraft and ship it across the ocean. Goods these days are nearly always sent in a steel container in one of a number of standard sizes. The most common is 40ft by 8ft by 8ft 6in. This is big enough to contain a light twin or one or even two single-engine aircraft. The containers can be treated quite roughly as they are loaded and unloaded from the specialist ships that ply to and from international ports, so it is vital to secure the dismantled aircraft thoroughly.
Heavy components such as the engine should be ratchet-strapped, chained or bolted to the securing points inside the container. Fragile structures such as the fuselage and wings need to be padded, ideally with foam and placed in frames. Some people go so far as to build wooden boxes to hold the aircraft components and ship the boxes inside containers. Companies that regularly send dismantled aircraft by container build up an awareness of what can go wrong and are a safer bet than doing it yourself and finding out the hard way.
Published in the October 2007 edition of Flyer magazine, copyright and not for reproduction
Legal eagles Ian Gee and Ajay Wiltshire guide us through the minefield of buying an aircraft
You’re a person of discerning taste, you’re astute (after all, you’re reading this magazine) and you’re a highly-trained, capable, sensible pilot – so you certainly haven’t paid good money for a heap of junk... have you, now?
I have to tell you that even our most hardnosed client – and even the occasional solicitor – can fall head-over-heels in love with a piece of flying scrap that the MOD would refuse to use for target practice. How I dread the excited Monday morning phone call: “Guess what, I’ve bought a new toy! Just sort out the paperwork for me, will you?”
Speaking on behalf of aviation lawyers, we would make just one plea: if you are thinking of purchasing an aircraft, please take advice before you buy your aviation dream.
There are a number of solicitors who specialise in aircraft purchases and these are the people who will make sure that the purchase documentation matches your understanding of the situation and that you will end up with full legal title to the aircraft. They’re also highly regulated and maintain professional liability insurance.
What they won’t be able to tell you is whether the aircraft is mechanically or structurally actually any good – for that you’ll need an independent engineer to go over your intended purchase with a microscope. All these extra advisors will raise the acquisition cost of your new aircraft, but they should save you money in the long run by ensuring that you buy the right aircraft; at the very least they should make you fully aware of just what you are buying. More importantly, they could talk you out of buying a plane that could kill you.
Aside from finding your aircraft, you need to find your professional advisors. How do you know if a solicitor, engineer, aircraft dealer, accountant or tax advisor is any good? Ask for a reference and if they refuse or can’t provide one that’s your cue to look elsewhere. Also, ask around your flying friends – General Aviation in the UK is a very small world, and with some careful research you should be able to put together the appropriate team to help you buy anything from a Piper Cub to Gulfstream V.
Who are you buying from?
Picture the seller who is parting with his pride and joy, while almost weeping as he tells you the meagre price he requires... Before you go anywhere near the aircraft, or even the airfield, make sure that you understand exactly who this generous soul is.
It is not uncommon for aircraft to be owned by companies – most of the aircraft on the NRegister are owned this way, for instance. While you may think that the aircraft is owned by that nice man at the aero club, you may find that the aircraft is actually registered to IG Aircraft Inc of Delaware, and who controls that?
A large number of G-Register aircraft are also owned by companies, perhaps because the owner has reclaimed the VAT (more on this tricky issue later). Or perhaps the aircraft has been owned by a syndicate. Either way, make sure that you understand exactly who the seller is and who has the authority to sign the sale documentation.
If necessary, your advisor can conduct searches on an individual or a company. If you are dealing with a company, these searches should also disclose whether the aircraft is encumbered, i.e. mortgaged or subject to a lien or charge. Your advisors will also ensure that the purchase documentation contains sufficient warranties that the seller has clear, unencumbered title to the aircraft, full legal authority to sell the aircraft and that the aircraft is exactly as described in the sale agreement, that the sale of the aircraft will not contravene any other agreement and that no registration, permissions, consent or approvals are required. They will also check that the seller has no legal proceedings threatened or pending against it/him, nor have any proceedings commenced or threatened for the winding-up or dissolution of the company.
One of the things that you must make sure you have is a detailed list of both equipment and paperwork. This should be compiled and incorporated into the purchase documentation to avoid uncertainty about what is being handed over upon completion – in future years, you don’t want one of those embarrassing Le Touquet moments when you just can’t find that C88 form that the Customs Officer is looking for.
What are the place, date and time of delivery?
Will all the logs and records be maintained and are they up to date? What searches can be made against the aircraft? Are there any warranties (parts etc) to be transferred to you? Once again, it is the warranties given by the seller in the purchase agreement that are crucial; the seller must warrant that the aircraft is in the condition you expect it to be in, complete with a valid Certificate of Airworthiness (unless of course you’re the kind of pilot who only buys wrecked fighters from the bottom of lakes).
What happens if there are any issues between exchange of agreements and completion? Picture the scenario: seller says you can collect the aircraft on Friday and it’s going in for its Annual on Monday (which of course it will sail through). You arrive on Friday and the engineers are refusing to release the aircraft as it’s got a gear retraction problem and cracked engine mountings – so who will pay for what?
Don’t forget to search the aircraft register for information on previous owners – and sometimes a quick Internet search on the aircraft’s call sign can yield interesting results, thanks to the plethora of plane spotter websites that now exist.
Survey and air test
Aircraft are usually sold ‘as is, where is’ – in other words, ‘what you see is what you get’. So make sure you can fly from the left-hand seat, or if you’re not experienced enough, get someone who knows what they are doing to fly for you. How detailed can your survey be? Who will bear the cost of the flight test? If you don’t like the aircraft then you want to have the right either to reject it or to present a list of remedial work.
You’re one step closer to flying your pride and joy… heart racing, sweaty palms, dry mouth. But before you hand over the deposit, clarify what happens if you do not complete the purchase. Under what circumstances do you lose your deposit and when do you get a refund?
Are you going to run the risk of paying the deposit directly to the seller or are you are you going to use an escrow agent? Plus, who pays the cost of the escrow agent... and in any case, what exactly is escrow?
Escrow is a legal arrangement whereby an asset (usually money) is transferred to a third party (the escrow agent) to be held in trust or otherwise pending a contingency or the fulfilment of a condition or conditions in a contract. Upon that event occurring, the escrow agent will deliver the asset to the proper recipient, otherwise the escrow agent is bound by his or her fiduciary duty to maintain the escrow account.
Escrow companies are commonly used in the transfer of high value personal and business property and in relation to person-to-person remote auctions (such as eBay).
What if someone withdraws?
If you change your mind and decide to withdraw from negotiations, will there be anything to pay? If the seller is able to sell the aircraft to another purchaser at a lesser price can the shortfall be claimed against you?
On the other hand, if the seller withdraws, what are your remedies? What about the time and money you’ve spent getting to the airfield, paying for engineers to inspect the aircraft, and your own wasted time?
Are you entitled to make any deduction? What currency is it to be paid in?
What about VAT? Are there any other duties or levies you need to pay? The VAT position of your potential new aircraft is critical and definitely deserves careful thinking about. Demand clear, unequivocal proof that VAT has been paid. If, on the other hand, the aircraft is being sold by a VAT-registered company, understand that you, as a private individual, will have to pay it – unless you have made cunning arrangements otherwise! If the aircraft was imported by a previous owner make sure nothing has been done which could affect its VAT-paid status. Has it inadvertently been exported outside the EU (perhaps to Switzerland or the Channel Islands)? Sorry to harp on about it, but there is nothing more embarrassing and frustrating than having your aircraft impounded – and at that point, the seller’s insistence that he’s “been to France loads of times and never had a problem” won’t save you.
What steps do you need to take to ensure that the payment is cleared and the aircraft is released? Beware the vagaries of bank transfers – it’s amazing how many same-day electronic transfers turn into week-long searches.
Further inspection and flights?
No one likes a time-waster, but if you are serious, what are the arrangements? What if you subsequently discover defects and you either don’t want to proceed or want a reduction in price? What sort of defect is the seller obliged to repair and can they be penalised for the delay? What if an Airworthiness Directive is issued between the exchange of agreements and completion? For how long can the seller suspend completion? Do you wish to limit the number of hours/landings between exchange of agreements and completion?
An inconvenient date?
What if you do not want to take delivery and/or pay the balance on the agreed date? Perhaps it’s your wedding anniversary, or Great Aunt Beryl’s funeral, or you’d just like to hang on a few more days for the dollar to weaken. Is the agreed completion date essential – and will you have to pay interest and recompense the seller for other expenses if they agree to a delay? Is there a deadline date which will enable the seller to terminate the agreement?
What if the aircraft has been damaged between exchange of contracts and completion? This can lead to a large number of complications. Is the seller obliged to repair – and under what timescale. Can they be penalised for any delay? What if their insurance company denies the claim? How long can the seller suspend completion? What if the aircraft has been ‘written-off’ between exchange and completion?
Are you entitled to compensation for your wasted expenses, assuming that the seller survived the accident? You will also want to ensure that, in the event the aircraft is destroyed between exchange and completion, the agreement will terminate automatically and your deposit will be refunded. Unless, of course, you forgot to put the gear down on your test flight, in which case we’re into a very different discussion...
Legal title and risk
What steps must have taken place to ensure legal title to the aircraft will pass to you? At what stage will risk and insurance responsibility pass to you? Have you phoned your insurance broker? What if documentation is not available to be handed over at completion – should you go ahead? – the answer to that is: No!
Ten final questions
As you can see, there is a fair amount to think about besides range, mtow, cruising speed and whether you can jam another GPS into the panel. It can be a minefield.
We’ve listed most of the questions in this article because, in the past, someone, somewhere, forgot to pose them at a crucial time. Here are ten more. Along with your specialist legal adviser, you should be aware of all these issues.
If you can ensure that these issues are covered in the purchase agreement then you should be able to minimise the risk when buying your latest toy... sorry, ah: tax deductible expense.
Delays. What if completion has been delayed due to circumstances beyond your control? Can you be penalised? How long can you make the seller wait?
Warranties. If the seller gives warranties in the purchase agreement, can the seller restrict their duration and amount? You will want warranties to be effective for as long a possible.
‘All terms’. The agreement should be declared to include all terms. It is essential that all the terms of the purchase are included in the agreement and only in the agreement.
Extensions. If you allow an extension of time for the agreement, can you require compliance at a later date? You should have it recorded that you do have the right.
Mortgage. What if there is a mortgage on the aircraft? How do you ensure that a mortgage is paid off and registrations cleared?
Variations. What if the agreement is to be varied or added to by mutual agreement? How is this to be recorded? What if some other essential document or action is needed which had not been anticipated? Can you make the seller comply?
Third Parties. You should prevent any party other than the seller who benefits from the Agreement from enforcing any term within it.
Dispute Resolution. You should consider a requirement to refer disputes to arbitration, rather than to court.
Governing Law. If the seller is from another country, then you will want the agreement to be governed by your jurisdiction.
Defects. What if a defect in the aircraft causes an accident subsequent to the sale? Can you claim against the seller? Is it in your interests to have the seller named on your insurance policy?
When you compare selling houses to selling aircraft, it’s amazing how regulated the house conveyancing system is. An aircraft can cost as much, yet sometimes it all comes down to a twenty-minute flight and a handshake.
By now you should be aware of the questions to ask and the need to get professional advice before you part with your hard earned money.
Nothing pains us more than speaking to a client who has to spend a few thousand pounds in legal fees extricating himself after the event – just because he tried to save himself a few pounds in legal fees before the event.
Superior pilots are those who obtain superior advice in advance!
Ian Gee is with JWK Solicitors, and Ajay Wiltshire is with The Heritage Group.
Published in the July 2008 edition of Instrument Flight, copyright and not for reproduction
Pre-flight: before you start up your pride and joy, consider the law…
One of the most irritating things about clients is when they ask for after-the event legal advice because, at the time they decided to sell a controlling stake in their company, to a man they met in the pub, on the basis of an agreement he drafted, they all thought that lawyers were too expensive, took too long and it was such a simple agreement that they did not need one. We would always emphasise the need to take some advice from a lawyer and an accountant at the outset of any financially meaningful transaction. This article does not cover taxation issues, for which you must rely on a tax adviser. So, you might well think that you can refer to this article for advice; we could not possibly comment!
FAA N-registered aircraft
Only a US citizen or a US corporation can own an N-registered aircraft. So, your first option is to find a friendly American, who may be a friend, relative or even a spouse. This person becomes the registered legal owner of the aircraft and you can then complete some form of agreement to determine the actual ownership of the aircraft. Be warned. I have a friend who is a car collector and his wife takes great pleasure in telling people that he can never leave her as she’s ‘got him by the Bentleys’: when somebody has you by the Piper, it’s much, much worse! The other option is to use an agency to provide the registration service for you. There are a number of well-established organisations which provide N-registration. In choosing a professional service provider, you pays your money and you takes your choice. You can get an aircraft registered for a few hundred pounds – it all depends on how comfortable you are with entrusting your aircraft to someone else. Is your provider licensed and fully insured to provide trust (fiduciary) services? What level of professional indemnity insurance do they maintain? Do they have in-house lawyers and accountants? What amount of assets do they have under management? What should you look for? A special purpose company or corporation as a legally distinct entity set up to own the title to your aircraft, and only your aircraft, not anybody else’s as well. The ownership of the company shares must comply with FAA rules and will normally involve the use of a US trust. The trust deals with the relationship between the company, its shareholders and you, the real owner. The company and the trust should both be managed by a reputable, licensed agent.
N-registration and UK training
Foreign registered aircraft may only be used for flying training in the UK if the flying instructor does not receive valuable consideration for his services, or permission has been obtained from the Department for Transport under Article 140 of the Air Navigation Order. Permission will normally be given only to the owners of the aircraft concerned, or to any pilot employed by the owner to fly the aircraft on their behalf. If the aircraft is owned by a trust, permission may be given to the real owner. If this is a group or company, permission may be given to members of that group or directors if the number of members or directors is no more than four.
FAA pilot responsibilities
Under FAA rules pilot responsibilities include:
• monthly VOR equipment checks prior to flight under instrument conditions FAR 91.171;
• recent flight experience FAR 61.57;
• valid biennial flight reviews FAR 61.58;
• pilots must be in possession of a valid FCC radio operator permit as well as a radio station licence.
UK Air Navigation Order (ANO) – public or private?
Under the ANO, requirements for a flight to be deemed as a private flight include:
1. where an aircraft is owned jointly by natural persons (not a company) who each hold not less than a 5% beneficial share and the aircraft is registered in the names of all the joint owners; or
2. where it is registered in the name(s) of one or more of the joint owners as trustee(s) for all the joint owners and written notice has been given to the CAA of the names of all the persons beneficially entitled to a share in the aircraft; or
3. where it is owned by a company in the name of which the aircraft is registered and the registered shareholders (each of whom is a natural person) each hold not less than 5% of the shares in that company.
If you ask a passenger to contribute valuable consideration in any way to the costs of a flight then the flight is likely to be deemed to be public transport. This includes a payment in kind e.g. the right to stay at their villa in Malaga.
Whether ownership is by a company or by an individual, regard must be had to Article 52, which provides that the commander of an aircraft shall reasonably satisfy himself before takeoff that:
• the flight can safely be made, taking into account the latest information available as to the route and aerodrome to be used, the weather reports and forecasts available and any alternative course of action which can be adopted in case the flight cannot be completed as planned;
• that the equipment required to be carried in the circumstances of the intended flight is carried and is in a fit condition for use;
• that the aircraft is any every way fit for the intended flight;
• that the load carried by the aircraft is of such weight, and is so distributed and secured, so that it may safely be carried on the intended flight;
• that sufficient fuel, oil and engine coolant (if required) are carried for an intended flight;
• that having regard to the performance of the aircraft and the conditions to be expected on the intended flight, and to any obstructions at the places of departure and intended destination and on the intended route, it is capable of safely taking off, reaching and maintaining a safe height thereafter and making a safe landing at the place of intended destination;
• and that any pre-flight check system has been complied with.
Also be aware of Article 53, which requires the commander to take all reasonable steps to ensure, before the aircraft takes off on any flight, that all passengers are made familiar with the position and method of use of emergency exits, safety belts, oxygen equipment and lifejackets and all other devices intended for use by passengers in the case of an emergency; and that in an emergency during a flight, all passengers are instructed in the emergency action which they should take.
A company is a body corporate. It is a legal person distinct from its members and officers i.e. its directors and secretary. Even if a company is 100% owned and controlled by one shareholder, that company is a completely separate legal personality from that of the shareholder. This becomes a particularly relevant consideration should, for example, there be an accident and a claim made which is beyond the insurance policy limit, or if the aircraft has been flown outside the terms of the insurance e.g. geographical limits. Whilst a company structure is not assured to give protection of personal assets, and it involves extra set up and administration costs, it nevertheless adds to the smoke and mirrors! However, there are circumstances in which a court may be willing to ignore the fact that a company is a separate legal person. For example, any person who is, or was, knowingly a party to ‘fraudulent trading’ by a company whose business has been carried on with intent to defraud creditors or other persons, may be liable to pay the debts of the company; and the directors of the company may be personally liable in cases of ‘wrongful trading’, which arises where a company becomes insolvent and the directors then fail to take steps to protect creditors. Remember that, as per the ANO, as an exception to public transport and aerial work, shares have to be taken by a natural person - so a company cannot own shares in a company. Whichever route is chosen, there should be an agreement drawn up to regulate the relationship between the individuals involved.
Under the strict letter of the law, the duty of good faith which you owe to your insurer, includes not only a passive duty to refrain from misrepresentation but also a duty to volunteer information on material circumstances. Material is if it would influence the judgment of a prudent insurer in fixing the premium or determining whether to take the risk. The remedy for non-disclosure is that the insurer is entitled to refuse all claims. The Financial Services Authority introduced the Insurance Conduct of Business Rules, which impose a range of statutory duties on insurers and intermediaries and in particular require that insurers cannot unreasonably reject a claim. The Financial Ombudsman Service (FOS) is not bound by the strict law and will not support an insurer avoiding the policy unless the consumer was asked a clear question about the matter under dispute. If the FOS is convinced that the question answered wrongly induced the insurer, the outcome depends on the policyholder’s state of mind at the time the misrepresentation was made. The Law Commissions started an extensive review process and a consultation paper was published in 2007, whereby it is proposed to abolish a consumer’s duty of disclosure. It is stressed that the Law Commissions are of the view that consumer insurance should be subject to a different regime to business insurance. It would not be possible to contract out of the new rules governing misrepresentation and nondisclosure in consumer insurance except in favour of the consumer. Consumer is an individual acting for purposes which are outside his trade, business or profession.
Detention and sale
Finally, consider section 88 of the Civil Aviation Act if you allow a flying school/club to use your aircraft. An aircraft can be detained and sold, not only for certain airport’s charges relating to that aircraft, but also for charges owed by any other aircraft of which the person in default is the operator. So, with no minimum amount owed, your aircraft could be detained, and even lost, for the debts of the flying school/club. Therefore, before you start up your pride and joy, there is much protection to have considered!
In recognition of his expertise, Ian is recommended in the Legal 500 for his aviation practice.
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