In most aircraft purchase and sale transactions the aircraft purchaser/buyer will initially place a portion of the purchase price in the custody of an escrow agent – the escrow agent being one that is mutually acceptable to both the purchaser and the aircraft seller/vendor. This initial amount is referred to as a deposit. In some transactions there can also be incremental deposits of funds tied to various stages of an aircraft purchase transaction or, in some cases, certain portions of funds can transition from being fully refundable to non-refundable.

Deposit funds are held by EscroAir, at the sole discretion of the remitter, until such time as we receive written instructions, acceptable to us, to otherwise hold or disburse the funds. Such instructions might include a binding letter of interest/intent (LOI) or an aircraft purchase agreement (APA). Deposits are often required by aircraft sellers to give them a sense of commercial certainty regarding the intention of a purchaser to complete the aircraft purchase transaction. Deposits can also provide for certain security relating to, for example,  charges incurred by an aircraft seller for ferrying the aircraft to an inspection location as well as the costs of such inspection should the prospective purchaser of the aircraft fail to pay for the pre-purchase inspection. Often times, deposits are used to advance a deal when the details of the transaction have yet to be ironed out among the parties relating to such things as the aircraft delivery location and condition, the scope of the pre-purchase inspection, status of existing part and engine programs, etc. As most transactions can take anywhere from 1-3 months to complete, the parties can take comfort in the fact that a deposit has been submitted by the aircraft purchaser, and depending on the terms of the LOI, APA or other agreement among the parties, the deposit gives each party commercial confidence to continue devoting resources in order to complete the aircraft purchase and sale transaction.

Closing Process

Escrow Agents help to streamline the closing process involved in an aircraft transaction. Leading up to the day of closing (and as far in advance as possible), the Escrow Agent receives the documents required under the LOI or APA, usually in executed and undated format. Where the aircraft purchase agreement, or the parties require, EscroAir can accommodate both original and digitally executed documents submitted in escrow. Transport Canada does NOT require original documents when submitting an application to register the purchased aircraft on the Canadian Civil Aircraft Registry or relating to the deregistration and export of an aircraft. In addition to receiving the documents, the Escrow Agent also receives instructions from the parties as to the disposition of funds and documents. The form of these instructions can vary from transaction to transaction and can be as informal as emailed instructions or more structured using irrevocable instructions or escrow agreements.

On the day of closing, or a few days preceding it, the purchaser will wire the balance of the purchase price and other agreed upon financial obligations into the escrow account. Escrow fees are usually split evenly among the seller and purchaser, although in some transactions one party may be responsible for paying the entirety of the escrow fees. Where the escrow fees are to be split, the purchaser’s funding of the escrow account will include half of the escrow fees and, at closing, the remaining half of the escrow fees will be netted from amount wired to the aircraft seller.

At closing and in advance, as may be required by the parties, the Escrow Agent will confirm the documents and funds that are being held in escrow. When everything is in order the closing process can begin and the documents will be filed and distributed as necessary, and wiring of the funds will be initiated in accordance with prior instructions.

Service Details

In acting as Escrow Agent during an aircraft transaction, EscroAir will first and foremost guard deposits, documents and purchase funds in escrow. Wire fees and couriering expenses are also included in the escrow fee. In addition, where the aircraft object qualifies for registration on the International Registry, the costs of IR registrations and discharges (contract of sale and/or international interests), and obtaining priority search certificates are included in the escrow fees. However, where parties do not have active Transacting User Entity accounts on the International Registry, the cost for registering each party will be in addition to the escrow fees.

All funds held in escrow are non-interest bearing.

Transacting User Entity Accounts
In order for EscroAir to establish a Transacting User Entity (TUE) account for you, EscroAir must be provided with both an executed confirmation of entitlement to act form, and where the TUE account is for a company or partnership, documents showing the due registration or existence of the entity or partnership. These documents can include a certificate of incorporation, certificate of status, certificate of registration, and in the event that none of these documents are readily available to be provided to EscroAir, we can (at marginal additional costs) obtain the required documents from the applicable provincial or federal corporate or partnership registry. Once the required documents have been submitted to the International Registry it usually takes 24-48 hours for the account to be fully activated. However, where a transaction is time sensitive the International Registry can respond more quickly, resources permitting.

TUE accounts are valid for one year and the fees charged by EscroAir for this service are similarly for one year of TUE account administration. Unless you plan to sell or refinance your aircraft, your TUE account does not need to remain active for any registrations to remain valid. When a TUE account becomes deactivated the registrations relating to that TUE are frozen in place and can only be dealt with once the TUE account is reactivated. Except for persons or companies that are regularly dealing in aircraft or have several aircraft that are the subject of periodic financing interests, the TUE account does not need to be maintained annually.

After a TUE account has been established EscroAir will manage the account and safeguard its unique secure-access key. As part of the TUE account administration and the associated fees, EscroAir will, on instruction, consent to any registrations involving your TUE account. However, where EscroAir is instructed to make or discharge registrations, these will be subject to additional fees.

This service is invaluable where parties may not be at a location that allows them to log on to the International Registry website when closings occur in order to consent to or register international interests on a priority basis.

Aircraft Objects
Cape Town Convention and the Aircraft Protocol adopted on the 16th of November 2001 at Cape Town, provide for the registration and protection of International Interests that are recognised by all ratifying states, with priority being determined on a First-to-File basis.

The legal framework of the Cape Town Convention establishes that airframes capable of transporting at least 8 persons including crew or goods in excess of 2750 kilograms, helicopters capable of transporting at least 5 persons including crew or goods in excess of 450 kilograms, and aircraft engines that have at least 1750 lb of thrust or its equivalent (jet propulsion) or have at least 550 rated take-off shaft horsepower or its equivalent (turbine-powered or piston-powered), each qualify as aircraft objects.

IR Registrations and Discharges
Upon instruction of the registering party, or where such registrations are provided for under a letter of interest/intent or aircraft purchase agreement, EscroAir will take the necessary steps to file registrations or discharges against the applicable aircraft objects on the International Registry.

Most registrations on the International Registry require two parties to consent to the transaction, including contract of sale registrations. In other words, where a purchaser of an aircraft intends to register a contract of sale on the International Registry, the seller must have an active TUE account and consent to such registration.

Professional User Entity Authorization
To facilitate and expedite registrations on the International Registry, except in the simplest aircraft transactions, EscroAir will seek to be appointed as the Professional User Entity with regards to the affected aircraft objects (airframe(s) and engine(s)). For TUE accounts that EscroAir has established or administers, you do not need to be worried about this process as we will take care of it. However, where the TUE account is administered by another party, that party must take steps to grant the requisite PUE authorizations to EscroAir in order for us to be able to make the registrations as instructed. At the instruction of the parties, EscroAir can similarly grant the requisite PUE authorizations to another PUE account, where the registrations are being made by that other Professional User. This is sometimes required by aircraft lenders, where they intend to have the registrations made by their own specialized International Registry counsel, or in-house teams.

Despite the granting of PUE authorizations, which in effect allows the Professional User (EscroAir) to consent to registrations and discharges on behalf of the authorizing parties, registrations will usually be made using the International Registry’s Closing Room function. The Closing Room allows for the sequential and near-immediate release of pre-positioned registrations and discharges. Notifications and draft pre-registration reports will depend on the role of the parties, the functionality of the International Registry’s Closing Room, and additional instructions of the parties.

EscroAir cannot provide advice with respect to any registrations or discharges, for example, whether such registrations are required or advisable, or regarding the validity or effectiveness of such registrations. Ordinarily legal counsel for the parties would review the proposed registrations and discharges before they are submitted to EscroAir for implementation.

Priority Search Certificates
Priority Search Certificates are obtained based on aircraft objects and serial numbers. They provide a historical listing of all (if any) registrations and discharges made concerning an aircraft object. Except as provided for as a part of our escrow services, Priority Search Certificates are each provided for a fee. For example, where a person wishes to obtain searches on one airframe and two engines, this will constitute three certificates. Where an aircraft object appears more than once on the International Registry because of a variation on its serial number having been manually entered into the International Registry, EscroAir will also obtain the Priority Search Certificate on any near matches, and regardless of the variation of the manufacturer’s serial number, these will also be considered additional searches.