Few things are as wonderful as flying in your own private aircraft – the efficiency and comfort of travel are a fantastic boost to productivity and personal satisfaction. Buying your own aircraft is almost as thrilling, and when the acquisition process goes well you are, quite literally, flying high!
On the flip side, few things are as needlessly expensive, frustrating, or disheartening as an aircraft acquisition gone bad.
While there is no guarantee that even the best planned aircraft acquisition will go off without a hitch, having a well drafted, professionally prepared Airplane Purchase Agreement can ensure that you are protected, if things start to fall apart.
List of Reasons you need a bullet-proof Aircraft Purchase Agreement:
- A poorly structured acquisition can mean millions in tax liabilities that could have been legally avoided.
- Mistakes in an aircraft purchase agreement can lead to incorrect aircraft registration documents and invalid registrations – which can lead to insurance company denials of coverage if there is an incident with the airplane.
- If the aircraft purchase agreement doesn’t specify who is paying for a service, a fee, aircraft movement costs, inspection costs, or any other related expense, you can bet that the other party expects you to pay it.
- When and under what circumstances a deposit becomes non-refundable must be carefully spelled out so that you don’t lose a deposit that you didn’t realize was at risk, or at the mercy of someone else’s actions.
- As the purchaser, you don’t want the timing of the transaction to be at the mercy of the seller’s schedule (or lack thereof) so make sure a timeline with deadlines is established and reasonable and that the agreement states that time is of the essence.
- Without a specified delivery location, or a provision that says it must be a mutually agreeable location, you could be stuck with extra tax liability by being forced to accept delivery of the airplane wherever the seller chooses to leave it.
- As a purchaser, you shouldn’t be liable for any pre-closing damage or destruction to the airplane that is beyond your control and influence, and such pre-closing damage or destruction of the airplane shouldn’t jeopardize the refundability of your deposit.
- You could end up accepting an aircraft with major damage or with major repairs or inspections due because the required pre-purchase inspection of or the delivery conditions for the aircraft were inadequately described in the purchase agreement
- If an aircraft purchase agreement doesn’t require proper title searches and lien releases at closing, you can get stuck with an encumbered and unmarketable title to the aircraft.
Many buyers approach a new aircraft purchase blinded by the gorgeous aircraft and the excitement of flying in it. This often leaves them less careful than they normally would be in most of their decisions and more trusting of the seller than maybe they should be.
The seller almost always seems trustworthy as the purchaser enters an agreement to buy an aircraft; if he didn’t, chances are the purchaser wouldn’t be buying an aircraft from him.
However, with high value complex equipment like today’s aircraft, a handshake deal made on the ramp isn’t enough. That initial agreement to terms must be backed by a well thought-out and drafted contract that will offer the protections necessary for an aircraft purchase.