The Unfortunate Case of Selling Your Aircraft

Sooner or later, each aircraft owner must come to grips with the idea that it's time to sell the airplane. This event typically comes with mixed emotions and can be very difficult to contend with in a business-like manner.

Nevertheless, just like any other large personal transaction, you are best served dealing in a straight-forward, business-like manner. The following are items to consider when preparing to sell your airplane.

If you decide to engage the services of an aircraft broker, there are a couple of issues you should consider:

• Make sure the brokerage agreement is in writing. Any time you engage the services of a broker to sell an aircraft, you should confirm your agreement in writing. Let’s face it, nobody likes dealing with contracts. They’re boring, if not confusing; and they’re time-consuming. But, at the end of the day, you will want something in black and white that states who is responsible for what when “things go bump in the night”. And that is simply what contracts do. They determine who is responsible for what. As the seller of an aircraft, you should demand a written contract. Even if the contract is fairly one-sided in favor of the broker, you will at least know where you stand legally. Lastly, make sure you have your insurance agent and your attorney review this contract prior to signing.

• Consider who should carry the insurance coverage while the broker is selling the aircraft. Given the buyer’s market in aircraft sales today, there will typically be an extended period of time that the aircraft is on the market until it is sold. This period of time can see the aircraft in the care, custody, and control of the broker or one of the broker’s designees. This is not always a negative for the seller. The more the broker shows the aircraft, the more likely you’ll find a buyer. However, a general principle exists in insurance. Insurance companies don’t really like to insure risks that are outside the care, custody, and control of the policyholder. In this situation, a broker may demo the aircraft to a prospective buyer without the seller being present. Essentially, the broker is operating the aircraft on behalf of the seller – away from the seller’s care, custody, and control. In a perfect world, the broker should be responsible for the coverage on the aircraft while they are operating the aircraft. If they damage the aircraft or inflict bodily injury (or death) while operating the aircraft, the broker should be responsible. However, that is in a perfect world. We must return to our first consideration. What is shown in the contract between you and the broker? It’s okay if you are required to carry the coverage, even when the aircraft is in the care, custody, and control of the broker. But, that requirement in the contract should trigger a requirement of the broker to provide you with equal protection. The broker should carry as a minimum Non-Owned Aircraft Liability, including Non-Owned Aircraft Physical Damage, and Workers’ Compensation coverage. The broker should be able to provide you with a Certificate of Insurance confirming that coverage and putting you at ease that you are not the only financially responsible party around if something should go wrong.

• Find out who will be flying your aircraft. Some brokers will fly your aircraft to demo the aircraft for a buyer, or to reposition the aircraft for inspections. You should get the full details of the broker’s pilot. They should have recent experience in your make and model and meet the terms of your insurance policy’s pilots section. With the wide variety of aircraft a broker will attempt to sell, it is difficult for a broker to maintain a cadre of pilots/salesmen that are current or properly qualified to fly all of the various aircraft out there. And, the last thing you want to discover after a loss is that the pilot/salesman did not meet the requirements of your insurance policy. Either demand that the broker provide a qualified pilot to operate your aircraft, or have it stipulated in the contract that all flights will be made by the seller.

Having a broker sell your aircraft can be a great benefit to the seller. It is likely more prospective buyers will consider the aircraft and the aircraft will likely sell quicker than trying to do it yourself. Also, the broker provides that emotional detachment the seller should have when selling the aircraft. Nobody really wants to sell their airplane. But, that time comes for everyone and a broker can be a great asset. Just make sure you enter into the brokerage agreement with a business-like approach. Selling your aircraft involves a considerable investment and should not be put at jeopardy by making some innocent, albeit expensive, errors.

If you decide to sell the aircraft yourself, please consider the following issues:

• Take someone with you when you meet with the prospective buyer. There is safety in numbers and it is always nice to have someone with the plane at all times. Although it is rare, there have been occasions where a seller and a buyer were inside the terminal building when an associate of the seller absconded with the aircraft (this happened to a major aircraft manufacturer in one instance). Also, a “second set of eyes” is always good when you begin negotiations. Again, a disinterested third-party (your friend) may spot something that you might miss due to the emotional nature of the transaction.

• Demand certified funds before transferring ownership. This will reduce the credit risk you face when selling the aircraft. If you are not dealing with an escrow account, receiving certified funds prior to executing a Bill of Sale is a must. You likely had to provide certified funds when you purchased the aircraft and it is good practice demand the same of the prospective buyer.

• Have a Sales Agreement drawn up for the sale of your aircraft. Relying solely on the FAA Bill of Sale is not adequate to protect your interests. Many other issues come into play when you sell the aircraft that must be set out in writing. Are you selling it “as is, where is”? Is any warranty provided? Is there any support equipment included or excluded in the sale? Work with your insurance agent and your attorney to craft a Sales Agreement and get the buyer to sign it when ownership is transferred.

• If an inspection is required prior to the sale, inquire about the shop. In most cases the buyer will require a pre-purchase inspection prior to taking delivery. And, the buyer will want his/her own mechanic to conduct the inspection. Find out about this mechanic/shop. Do they have experience in the aircraft? What will they use as the basis of the inspection – a generic 100 hour inspection or a manufacturer’s approved inspection checklist? Also, find out what insurance the shop carries. At a minimum, they should carry a Commercial General Liability policy including Products and Completed Operations along with Hangarkeeper’s Liability, and Workers’ Compensation coverage. If they don’t carry these important coverages, you should negotiate the use of a different shop. It’s still your bird. Don’t take a financial hit because the shop was not properly covered.

At the end of the day, you may decide to keep your airplane (sometimes you have to listen to your heart and ignore the purse strings). You could weather the economic storm through various means. Talk to your insurance agent about alternative coverages. Consider a partnership that allows you an ownership interest in the aircraft. But, if you have no other choice than to sell your aircraft, please talk to your insurance agent first and follow the guidelines above. You’ll do more work, but you’ll approach this transaction in a straightforward, business-like manner.