This seems to be fairly common in the USA (at least if US forum posts are anything to go by) but seems rare here in Europe.
What is the exact process and where is the liability delimited?
How does using an escrow agent help with buying a can of worms? It surely cannot protect you from an inadequate prebuy inspection.
Escrow can be used for any large purchase where the risk is high when exchanging a high value asset for cash. Contact any bank or Google ‘escrow’ In the USA escrow companies are private registered financial agents. In parts of the USA lawyers are also involved, but not everywhere.
I recently used a US based escrow service. Essentially they hold the buyer’s money and transfer it to the seller only when the conditions agreed in the sales agreement are confirmed to be met by the buyer. Therefore it is is essential to get all conditions precedent to a sale included in the SA…like all ADs complied with, Proof of VAT, avionics all working, etc… the SA should detail who pays for the pre-buy and what to do with any issues discovered (owner rectifies or price reduced or right to walk away etc…)
Many aviation escrow services also do a title search with the FAA and check for any FAA registered mortgages and liens. They can also pull all the FAA recorded accident history and all submitted 337s….
Obviously more useful for N reg…
Escrow ensures that funds are in place and title is transferred (after any conditions are satisfied) at the same time as funds are moved. It has nothing to do with the pre-buy.
It works in the UK just as well as the US.
Yes, the “conditions to be satisfied” are detailed in the Sales Agreement
The club I am a member of recently purchased an aircraft (Archer III) in the states, we used Wright Brothers Aircraft Title to provide the escrow services but also to ensure there were no outstanding debts / liens placed on the aircraft. At the same time, it gave the seller some security that we were serious because we wanted a particular Service Bulletin carried out ( can’t remember the one but t’s to check for corrosion of the main spar behind the tanks which would have been due the following year; as the plane was based close to the coast, it made sense to have that done as part of a pre-buy). However it couldn’t be done at the local field so the plane was collected by the ferry pilot, flown to a location where they regularly carried out such checks and, once the inspection was complete, the ferry pilot went back to the aircraft at which point he rang Debbie who made sure the transfer of title was carried out and the money less deposit was wired to the previous owner.
Using an escrow Agent also ensures that you don’t do a pre-buy inspection on an aircraft, find everything is ok, go away, transfer the money and a couple of days later return to the aircraft to find (e.g.) the GNS430s have suddenly “vanished” because the ownership and money changes at the same moment in time when you, the purchaser, agree to the release of the funds.
Including a title search, I think it cost us just under $1000 which is worth the peace of mind when spending north of $180k for an aircraft.
I think you could readily set up an escrow in the UK using a solicitor. The money would be held on their client account until the terms of the contract had been met.
It is interesting given the similarity between boats and aircraft how the sale process in the UK at least is different. In the maritime world it is usual for a broker to “demand” a substantial deposit, pending the survey of the vessel etc., which cannot be commissioned until the deposit has been paid. Often the deposit is not refundable if the buyer “simply” decides to withdraw. With aircraft this seems much less common, although in the same way a sensible buyer will have the aircraft surveyed.
The advantage of using a solicitor is that the funds are ring fenced and safeguarded by the Law Society – I am always surprised that people are willing to pay often substantial sums to brokers or private individuals – albeit there seem to be relativley few problems.
Why not use your bank and do a letter of credit?
In general, how do I verify the trustworthyness of an Escrow service?
I know there are a lot of fraud going on with forged websites, similar names as the large players and so forth.
Does anyone have experience with Insured Aircraft Title Services Inc, Oklahoma, USA, or a different partner for transfer of a N-reg title?
G
Does anybody have information about escrow services in france?
