It is common for aircraft sale and purchase contracts to agree to make use of escrow agents as trusted, neutral third parties to hold aircraft papers and the all-important deposit during a transaction. To use an escrow adds additional transparency and security to the deal and the escrow agreement can be a powerful tool to ensure that all of the required closing matters are attended to - it can, for example, provide for certain amounts to be held in escrow post-completion pending agreed conditions.
There are a number of different layers to this:
Parties will wish to ensure that the escrow agent has no affiliation or ties to the seller or the buyer, nor any of the brokers or lenders involved in the transaction. This need is to ensure impartiality in the case of ambiguity or conflict during the process.
Once the buyer and seller have agreed on the heads of terms for the Sale and Purchase Agreement (or "Bill of Sale"), the buyer will submit a Letter of Intent ("LOI") to the seller on those terms. Once accepted, the buyer is usually required to deposit money in escrow in contemplation of completion. This deposit confirms the buyer's commitment and secures the aircraft while the contract is being finalised.
Following the entering by the participants into the escrow agreement, the buyer and seller will deposit the necessary documentation (including the aircraft title, registration documents, Bill of Sale, maintenance records, purchase agreement and any inspection reports) with the escrow agent.
The aircraft buyer will usually inspect the aircraft while this deposit is safely held, in order to verify its compliance with the purchase agreement before the transfer of documents and funds.
At completion on the terms of the agreement, the buyer will instruct the escrow company to release the money to the seller, and the seller will instruct the escrow provider to release and provide the aircraft ownership documents to the buyer, all as set out in the Bill of Sale.
The closing process includes signing the final paperwork, transferring the title and completing any other required steps - the escrow agent can assist the parties' lawyers with all of these elements.
Once the transaction has completed and the aircraft has changed hands, the escrow agent will, in accordance with the escrow agreement, need to provide a closing statement detailing the final amounts involved in the sale and often provide digital copies of any documents in a data room.
There are a number of considerations when it comes to choosing the right escrow company to handle your closing arrangements; including their experience with escrow, their location, their financial and regulatory arrangements and how helpful they are being just a few of these.
Most parties will prefer an escrow agent who is operating on their timezone and who has a good reputation and experience in the type and scale of transaction they are carrying out.
For US-US sales, it is normal for the escrow agent to also be based in the USA. For European sales, however, London, UK remains a popular jurisdiction for escrow agents, both because of its well-established legal and financial systems and because of its helpful geographic position and time-zone when it comes to the all-important closing.
Our company is also regulated by the Financial Conduct Authority for our payment service provision, so we are well-accustomed to the compliance and professional obligations we are required to adhere to. Others may not be regulated, per se, but will have a registration with the relevant regulators to affirm their compliance and anti-money laundering systems.
The underlying bank and any credit risk they pose will be of utmost importance to the contracting parties. We use only tier 1 banks, and for our GBP transactions we only store funds at the Bank of England.
Like all third-party escrow processes, the clear primary considerations are always security, transparency and independence. We add trust to aircraft transactions.
Some particular benefits of using an aircraft escrow are:
In our view, of course. Your legal representatives will be able to advise not only on the merits but also on the best people to speak with. They will have experience of negotiating escrow agreements as well. We would be happy to quote for your contemplated arrangements as well - simply request a quote here.
dospay is a trading name of DOS & Co. Ltd, a company registered in England and Wales with company number 08294966.
DOS & Co. Ltd. is registered with the Financial Conduct Authority under the Payment Services Regulations 2017 (FRN: 833374) for the provision of payment services.
All of our escrow and third-party managed accounts are segregated and safeguarded at the Bank of England.
