The Oklahoma Bar Journal October 2024

may result in additional FAA filings and corresponding IR reg istrations. At the time such reg istrations are made, entities must have active accounts on the IR. Fortunately for lenders and lessors, the only entity required to have an active account for a dis charge is the RTD holder. Entities that have lapsed into disabled status can be renewed in order to be active for a discharge. With respect to the IR, if an interest has been released, the releasing party is obligated to make a corresponding discharge on the IR in order to avoid cloud ing another party’s interest. 23 This requirement should be included in court orders. If a party refuses to make a discharge, an appeal can be made to the courts in Ireland. If the case is proved, the Irish court will issue an order to the registrar of the IR, and the registrar itself will make the discharge. 24 This is a lengthy and expensive process, one that is best avoided if possible. CONCLUSION As with many areas of life, the best defense is a good offense – doubly so in aircraft transactions! Awareness of potential pitfalls and the ability to steer clear of issues save parties from turbulent times.

As with many areas of life, the best defense is a good offense – doubly so in aircraft transactions!

the lessee may be able to buy the aircraft if citizenship requirements are met, with the lender avoiding loss of time and income while a new buyer is being sought. CLEARING THE INTEREST ON THE INTERNATIONAL REGISTRY Clearing the interest on the IR is a much quicker process, but it should not be completed until a filing at the FAA is made. The IR has broad, fixed categories of interests that can be registered. A lease or security agreement both fall under the heading of an “international interest.” When making an international interest registration, there will always be a debtor, a creditor and a party that holds the right to discharge the international interest (RTD holder). In the case of a security agree ment, the debtor is the borrower and the lender is the creditor and the RTD holder. For a lease, the debtor is the lessee, with the lessor functioning as the creditor and the RTD holder. Should financing occur after a lease, the lender often becomes the new RTD holder. Any registrations on the IR that relate to a security agreement or a lease should be registered on the IR at the time the transaction commences. Some subsequent changes, such as amendments,

or litigation, and the FAA filing is a confirmatory, self-certifying filing. After the dust settles, the prevailing party needs to look at the disposition of the aircraft. Who will own it after the claims are ended? Because the FAA is an owner registry, any registrant of an airframe needs to meet the citi zenship requirements contained in U.S. law. 21 Note that the FAA does not track ownership of engines or propellers, so this requirement is limited to airframes. 22 The lender, if it can meet citi zenship requirements, is allowed to register the aircraft in its name. (A lessor, by virtue of its existing ownership, would not need to take this extra step.) The statement of ownership in the certificate of repossession, plus the filing of required registration documents, allows the lender to title the aircraft in the lender’s name while it leases the aircraft or searches for a buyer. A lender can also set up a pass through sale, utilizing the certificate of repossession to evidence title, and then immediately selling to a third party (the third party would then be responsible for any additional documents to support registration or to deregister the aircraft). A pass-through sale benefits a lender because the lender is not obligated to meet the citizenship require ments. If there is a blameless lessee,

ABOUT THE AUTHOR

Tara M. Niendorf – a partner at Daugherty, Fowler, Peregrin, Haught & Jenson – focuses on representing clients

in matters associated with the purchase, sale, lease, finance and registration of aircraft. Her daily practice concentrates on facilitating and documenting aircraft transactions and title and registration

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.

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THE OKLAHOMA BAR JOURNAL