Understanding aviation title clouds and old liens
Title issues can cause significant delays, financial setbacks, and legal complications if not properly addressed. Issues encountered in aviation transactions are title clouds and old unreleased liens.
The role of the FAA
The FAA Civil Aviation Registry serves as a recording institution but does not guarantee a clear title. The FAA will not block ownership transfers due to an unresolved lien, and its records are only as accurate as the documents submitted. Errors in FAA recordings can occur, making independent title searches crucial.
What Is a title cloud?
A title cloud refers to any defect in an aircraft’s record that may complicate financing, insurance, or sales. These defects could be clerical errors, missing documentation, unreleased liens, liens that were unable to be recorded, or ownership discrepancies. Resolving title clouds is crucial, as unresolved issues can deter buyers and lenders.
Old liens and their impact
A lien is a legal claim against an aircraft, recorded by the FAA, typically filed by lenders, mechanics, or service providers. While most liens are released upon payment, some remain due to lost paperwork, clerical errors, or dissolved lending institutions. If not properly cleared, old liens can cause confusion and financial risks for new buyers. Consequences of purchasing an aircraft with an unresolved lien include:
- Loss of resale value
- Inability to collect insurance payouts on total loss
- Export restrictions
- Potential legal claims from unpaid creditors
Common causes of title clouds and old liens:
- Unreleased Security Interests–Lenders may fail to release liens after loans are paid off.
- Mechanic's liens–Unpaid repair bills can result in liens that may remain even after the debt is settled.
- Clerical errors–Mistakes in ownership transfers, names, or lien releases can lead to title confusion.
- Repossession issues–A bank may repossess an aircraft but fail to release underlying liens.
How to identify and clear title issues
Conducting due diligence before purchasing or financing an aircraft helps prevent costly surprises. Essential steps include:
- Title search. Reviewing FAA records and the International Registry (if applicable) to uncover liens and ownership history.
- Obtain lien releases—If an old lien appears, secure a properly executed release from the original or successor lienholder.
- Aviation title clearing specialist–Professionals can help resolve complex title issues.
- Escrow services–Using escrow services alongside title clearing specialists ensures title issues are resolved before the transaction closes.
- Quiet title action – If a lienholder is deceased or a company no longer exists, legal action may be required to clear the title.
Conclusion
Title clouds and old liens pose risks that can delay aircraft transactions. Ensuring clear title through due diligence, title searches, and expert assistance helps prevent legal complications and financial liabilities. Buyers, sellers, and lenders should proactively address title concerns to avoid disruptions.
Working with an aviation title company, legal experts, and escrow services minimizes risks, ensuring smooth transactions and long-term operational security. A clear title protects financial investments and provides peace of mind in aircraft ownership.
