The Oklahoma Bar Journal October 2024

would extinguish junior interests, including liens, and state that the title is vested in the lender by vir tue of the repossession action. Court orders should be con templated at the outset of any litigation because they, too, must contain information concerning the collateral at issue, the parties involved and the perfected docu ment (including recording infor mation) to the extent required by the FAA to link a particular court order with a particular aircraft. When a draft order is prepared, the information required by the FAA, extinguishing language, and a direction to discharge open IR interests should be included to ensure recordation and to act as evidence of the changed circum stances of the parties involved. For anyone who has been required to return to a judge to ask a favor, please take special note of the court order requirements. Judges do not look favorably on a lawyer returning to request a modification to an already-issued order, but the FAA is not in the business of preserv ing the dignity of lawyers or judges. In order to avoid an uncomfortable yet necessary conversation, the best practice is to include all the necessary FAA information and IR actions in the very first pleading filed. This allows the FAA-required information and needed IR actions to exist in the court record and can supplement an otherwise unrecordable final order to allow for recordation at the FAA without requesting modifications from the issuing judge. 20 ENSURING PROPER FILINGS AND FINALIZING THE PROCESS After this look at the end objective, it’s time to soar back to the beginning. Once an event of

default occurs, it’s important that an updated title examination be conducted at the FAA and on the IR. Although a title examination is commonly obtained at the outset of a transaction, an updated title examination will reveal what’s happened since the transaction closed. Has a lender been added? Do lien claimants exist? Has the aircraft been sold without proper notice given? These questions and more impact what actions need to be taken before any FAA filing or IR registration can be made. During the local law or UCC proceeding, having an updated title examination allows notice to be given to all claimants, including lien claimants or junior priority interest holders, as the certificate of repossession must contain representations that all interested parties have received notice and all appropriate actions have been taken under local law. In the case of a repossessing lender, a certificate of repossession only covers the repossession after a borrower defaults, indicating that notice was properly given and that title vested in the lender at the end of the repossession action. The lender would still need to arrange for the filing of a release at the FAA registry and for registration of discharges of any open IR interests. For a lessor that already owns the aircraft, the title does not change and the certificate of repossession should terminate any open lease, but IR discharges still need to be made. FILING REQUIREMENTS AT THE FAA It bears repeating that any filing at the FAA occurs after everything has been settled via local law or a UCC proceeding

when no conflict between the par ties exists. To clear an interest from the FAA records, a lender can file a release, and a lessor and lessee can jointly enter a lease termination, all while other matters are discussed and/or litigated. Otherwise, if a document indicating a unilateral action is placed in the FAA records, it is noted in subsequent title examinations and may impact the future marketability of the aircraft. Clearing the FAA records and dis charging open IR interests should be a part of any settlement negoti ations, and a bilateral agreement is the best possible outcome from a records perspective. If, however, the parties are unable to settle their differences amicably, the FAA will require a certificate of repossession or a court order (should litigation be required to settle the issue) for the record. A certificate of repossession can be filed by a lessor or a lender, among others, and is self-certified. A certificate of repossession fol lows a basic formula and identifies the collateral at issue, the parties involved and the perfected docu ment (including recording infor mation) that supports the filing of the certificate of repossession. It also affirmatively states that all required action under the govern ing local law was complied with and that notice was properly given to all interested parties. In addition to the information described immediately above, drafting parties should include specific language to clear the open interest: a certificate of repossession from a lessor would terminate a lease, while a certifi cate of repossession from a lender REPOSSESSION

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

OCTOBER 2024 | 21

THE OKLAHOMA BAR JOURNAL