privatejetWhen it comes to leasing and financing civil aircraft, it’s incredibly important to understand the various liens and interests potentially involved, based largely on Federal Aviation Administration Aircraft Registry Reports. These reports have been mandated on airplanes so that individuals can somewhat easily find all of the possible claims and other legal interests attached to the aircraft in question.

But what you also need to know is that there are certain interests and liens that you will not find on these reports. The real problem is that some of these interests take priority over all else, including anything recorded on the Aircraft Registry Report. The most common exceptions are mechanics liens, which may take a variety of forms.

The root cause of this confusion stems back to 1981, when the Aeronautical Center Council ruled that mechanics liens only needed to be included on an Aircraft Registry Report if allowed by the law in the state in which the aircraft was currently registered. This is because the Federal Aviation Act does not supersede any aspects of state laws related to the creation, perfection or priority of mechanics liens. And, even if a mechanics lien is filed on an Aircraft Registry Report, it’s only enforceable if state or territory allows it to be.

In other words, recording a mechanics lien on an airplane’s Aircraft Registry Report will not necessarily mean it’s at all enforceable—creating yet another headache for those looking to sell or purchase a civilian aircraft.

Knowing the various mechanics liens

The three main types of mechanics liens on aircraft are possessory liens, floating liens and liens over equipment like propellers, engines, appliances and spare parts. This represents yet another point of confusion, as different state and territorial laws may be associated with different requirements depending on the type of lien and the circumstances involved. This makes it important to work with a skilled attorney with some background knowledge and experience in aviation law, especially when it comes to security interest in civilian airplanes.

In short, simply knowing the rules and regulations of the FAA’s Aircraft Registry Reports may not be enough to try understand all of the liens, interests and claims on any single piece of aviation equipment. Thus, due diligence for lessors, secured parties and creditors requires digging a little deeper—ideally with the assistance of an attorney—to look into the relevant state and territorial mechanics lien laws.

BoltNagi is a widely respected and established law firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.