Aircraft title registration in the United States historically has been a voluntary-based compliance system. But relying on aircraft owners to police themselves in maintaining the accuracy of their registration records has also spawned a system with serious flaws. The Federal Aviation Administration (the “FAA”) in Oklahoma City, Okla., which maintains the U.S. aircraft registry (the “FAA Registry”), estimated that approximately one-third of the 357,000 registered aircraft records on the FAA Registry are inaccurate and that many aircraft associated with those records are likely ineligible for U.S. registration.1 Today we discuss a new FAA rule designed to improve the accuracy of aircraft registration records, and its effect on aircraft financiers.
Aircraft Lien Registration
Under the Federal Aviation Act of 1958 (the “FAA Act”),2 an aircraft owned by a “citizen”3 of the United States can be registered with the FAA as long as the aircraft is not registered under the laws of a foreign jurisdiction. In addition, an aircraft owned by a corporation that is organized and doing business under the laws of the United States but does not qualify as a “citizen” (e.g., because a sufficient percentage of its voting interests are not owned by U.S. citizens) can be registered in the United States if the aircraft is based and primarily used in the United States (meaning that at least 60 percent of all flight hours must result from flights starting or ending within the United States). All that is required to register the aircraft with the FAA is a completed aircraft registration application, evidence of title (such as a bill of sale) and payment of a $5 registration fee. Until just recently, aircraft registrations, once made, were effective potentially indefinitely.
