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

Deposit funds. in an escrow transaction, are held by EscroAir, at the sole discretion of the remitter, until we receive written instructions, acceptable to us, to otherwise hold or disburse the funds. Such instructions might include a binding letter of intent or an aircraft purchase agreement. Aircraft sellers often require deposits to give them a sense of commercial certainty regarding the intention of a purchaser to complete the aircraft transaction. Deposits can also provide 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, under the letter of intent or aircraft purchase the agreement, fail to pay for the pre-purchase inspection. Often deposits are used to advance a deal when the details of the aircraft transaction have yet to be ironed out between the parties in the aircraft purchase agreement – relating to such things as the aircraft delivery location and condition, the scope of the pre – purchase inspection, the status of existing parts and engine programs, etc. As most aircraft 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 letter of intent, aircraft purchase agreement or other agreement among the parties, the deposit gives each party commercial confidence to continue devoting resources to complete the aircraft transaction.

Closing Process
In aircraft transactions, escrow agents help to streamline the closing process. Leading up to the day of closing (and as far in advance as possible), the escrow agent receives the documents required under the aircraft purchase agreement, usually in executed and undated format. Where the aircraft purchase agreement or the parties require it, EscroAir can accommodate both original and digitally executed documents submitted in escrow. Transport Canada does NOT require original documents when applying to register the purchased aircraft on the Canadian Civil Aircraft Registry or relating to the deregistration and export of an aircraft. In addition to 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 one aircraft transaction to another and can be as informal as emailed instructions or more structured, using irrevocable instructions stated in the aircraft purchase agreement or escrow agreement.

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, according to the aircraft purchase agreement, into the escrow account. The escrow fee is usually split between the seller and purchaser, although in some aircraft transactions, one party may be responsible for paying the entirety of the escrow fees. Where the escrow fee is to be split, the purchaser’s funding of the escrow account will include half of the escrow fee, and, at closing, the remaining half of the escrow fee will be netted from the 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 currently held in escrow. When everything is confirmed in order the closing process can begin and the documents will be dated and distributed, as necessary. Wiring of the funds will be initiated in accordance with the aircraft purchase agreement.

Service Details
In acting as an escrow agent during aircraft transactions, EscroAir will primarily guard deposits, documents, and purchase funds in escrow, all according to the letter of intent, escrow agreement, or aircraft purchase agreement. Wire fees and couriering expenses are also included in the transaction escrow services fee. In addition, where the aircraft object qualifies for registration on the International Registry, the cost of IR registrations and discharges (contract of sale and/or international interests) and obtaining priority search certificates are included in the escrow fee. 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 fee. EscroAir can assist with aircraft transactions in both Canadian and United States currency.

All funds held in escrow are non-interest bearing.

International Aircraft Registry Services
Information Transacting User Entity Accounts
Buyers, sellers, and lenders wishing to have a filing completed on the IR will need to be set up as an approved Transaction User Entity (TUE), and the setup must be completed before the filing. For EscroAir to establish a TUE account we require 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, or certificate of registration, and if none of these documents are readily available, we can (at marginal additional cost) 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, www.internationalregistry.aero, 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 similar 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.

Trust EscroAir to always be available to log onto the International Registry website, on time, when closings occur to consent to or register international interests on a priority basis.

Aircraft Objects
The Cape Town Convention and Aircraft Protocol, adopted on the 16th of November 2001 at Cape Town, provides for the registration and protection of International Interests that are recognized 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 over 2750 kilograms, helicopters capable of transporting at least 5 persons including crew or goods over 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 it’s equivalent (turbine-powered or piston-powered), each qualify as aircraft objects.

IR Registrations and Discharges
Upon instruction of the registering party, right to discharge party, as applicable, 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.

International aircraft registrations require both parties to consent, including the contract of sale registrations. An international aircraft registration may be discharged by, or with the consent in writing, of the party in whose favor it was made.

Professional User Entity Authorization
To facilitate and expedite registrations on the International Registry EscroAir will seek to be appointed as the Professional User Entity (PUE) concerning the affected aircraft objects (airframe(s) and engine(s)), except where EscroAir is currently the TUE administrator. However, where the TUE account is administered by another party, that party must take steps to grant the requisite PUE authorizations to EscroAir for us 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, who intend to have the registrations made by their own specialized International Registry counsel or in-house team.

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, international aircraft registrations will usually be made using the IR’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 for the parties. EscroAir cannot provide advice for 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 action.

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 filed on the IR 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 for aircraft, 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.