Aircraft Title, Escrow & Closing: How Buying a Plane Actually Closes
You found the airplane and the pre-buy looks good — so how does the deal actually close? Buying an aircraft is a major transaction with its own legal and financial machinery: a title and lien search, a neutral escrow agent holding the money, a bill of sale, FAA registration in your name, releasing any existing lien, and — depending on where you are — possible sales or use tax. This guide walks through the closing process in plain English. It is educational information, not legal, tax, or financial advice.
This is general educational information, not legal, tax, or financial advice. Title, lien, registration, and tax treatment vary by aircraft, jurisdiction, use, and situation, and the rules and FAA requirements change over time. Before you close, consult a qualified aviation attorney, a reputable aircraft title & escrow company, and your own tax advisor about your specific purchase.
This guide picks up where the pre-purchase inspection guide leaves off. The pre-buy answers “is the airplane sound?”; closing answers “how do ownership and money safely change hands?”They're two different workstreams that run around the same purchase — and a clean closing is what turns a good inspection into a plane that's actually, cleanly yours.
What “closing” actually means
Closing is the moment the transaction becomes real: the buyer's funds and the seller's ownership transfer at the same time, backed by paperwork that makes it official and recordable. Concretely, a close involves a signed bill of sale conveying the aircraft, the funds released to the seller, any existing lien released so you get clear title, and the registration filed so the FAA records you as the new owner.
The hard part is trust: nobody wants to send the money before they have the plane, and nobody wants to sign over the plane before they have the money. That's why most aircraft purchases — anything beyond the simplest cash, hand-to-hand deal — run through a neutral escrow agent who holds both sides and releases them together once the agreed conditions are met.
The title & lien search
Before money moves, you want to know the seller can actually convey the airplane free and clear. U.S. civil aircraft ownership and liens are recorded centrally with the FAA, so a title company or aviation attorney can pull the records and look for trouble.
What a search looks for
An open mortgage or lien, a chain of ownership that doesn't line up, missing releases from a prior sale, tax liens, or transfers that were never properly recorded.
Why it protects you
You can buy a plane and still inherit someone else's debt or a clouded title if an old lien was never released — a problem that surfaces later when you try to sell or finance.
The goal is simple: turn up anything that clouds the title before you fund the deal, and make sure it gets cleared (for example, an open loan paid off and released) as part of the close — not discovered months afterward.
The escrow agent's role
An escrow agent is a neutral third party that holds the money and the signed documents and releases them only when both sides have met the agreed conditions — so neither party has to go first. Using an established aviation title & escrow companyis common practice precisely because it removes the “who sends first?” problem.
What an escrow typically handles
- The money. Holds the buyer's deposit and balance, then disburses to the seller and to any lienholder being paid off.
- The documents. Coordinates the signed bill of sale, the application for registration, and lien releases.
- The title work. Often runs or arranges the title search and helps make sure liens are released and recorded.
- The recording. Helps get the new ownership and registration recorded with the FAA so the records reflect a clean transfer.
One important boundary: the escrow agent executes the agreed transaction— they are not your attorney and don't give you legal or tax advice. For the advice side, that's what an aviation attorney and a tax professional are for.
The bill of sale & FAA registration
Two pieces of paperwork sit at the center of the transfer. The bill of sale conveys the aircraft from the seller to you. Then you, as the new owner, file to register the aircraft with the FAAin your name — the existing registration doesn't simply carry over automatically.
Bill of sale
The document that conveys ownership from seller to buyer. In a typical close it's submitted together with the registration application and any lien release.
Registration & N-number
You file to register the aircraft in your name. You can usually keep the existing N-number, or apply to reserve and assign a different available registration mark — a separate request.
Exact FAA forms, fees, and processing times are set by the FAA and change over time, so confirm the current requirements rather than relying on a figure you read somewhere. A title and escrow company or an aviation attorney handles this filing routinely.
The closing, step by step
Every deal is a little different, but a typical escrow-based aircraft closing runs roughly in this order:
A typical sequence
- Agree terms. Price and conditions are set in a purchase agreement (often with the pre-buy as a contingency).
- Open escrow. A neutral escrow/title company is engaged and the buyer's deposit goes into escrow.
- Title search. The records are pulled and reviewed; any lien or cloud on title is identified.
- Clear the path. Payoff amounts are confirmed and a plan is set to release any existing lien.
- Sign & fund. The bill of sale and registration paperwork are signed; the balance is wired into escrow.
- Disburse & record. Funds go to the seller (and lienholder), the lien is released, and the bill of sale and registration are filed with the FAA.
The point of running it through escrow is that the money and the ownership move together, on agreed conditions — instead of one side trusting the other to follow through.
Sales & use tax — a heads-up, not a determination
Buying a major asset like an aircraft can trigger sales tax or a use tax— but whether it does, and how much, depends on where you are, where the aircraft is delivered and based, how it's used, and the rules in the relevant jurisdiction. There is no single answer, and the way a transaction is structured can affect what applies.
The honest version
- Some situations have exemptions or specific rules; others don't.
- The amounts can be significant, and the rules vary by jurisdiction and change over time.
- Don't assume there's no tax — and don't assume a “workaround” you heard about applies to you.
The right move is to get advice from a qualified tax professional and/or an aviation attorney for your specific purchase before you close, so there are no surprises.
What to watch for
None of these automatically kills a deal, but each is a reason to slow down and get it handled before funds move:
Slow down if you see
- An open lien with no clear payoff and release plan in place before closing.
- A chain of ownership or registration that doesn't cleanly match the seller.
- Pressure to send money directly to the seller instead of through a neutral escrow.
- Skipping the title search to “save time” on a major purchase.
- Assuming sales/use tax doesn't apply without checking your specific situation.
The recurring theme: a neutral escrow plus a clean title search is how you avoid both the “who sends first?” trust problem and the nasty surprise of inheriting someone else's lien.
Frequently asked questions
What does it mean to "close" on an aircraft purchase?
Closing is the moment the deal actually happens: the buyer’s money and the seller’s ownership change hands at the same time, with the paperwork that makes the transfer real and recordable. In practice that means a signed bill of sale conveying the aircraft from seller to buyer, the funds released to the seller, any existing lien released so the buyer gets clear title, and the registration paperwork filed so the FAA records the buyer as the new owner. Closing is a distinct step from the pre-purchase inspection: the inspection answers "is this airplane sound?" while the closing answers "how does ownership and money safely transfer?" On all but the simplest cash deals, both buyer and seller usually want a neutral third party — an escrow agent — to coordinate the exchange so neither side has to send money or sign over the plane first.
What is a title search and why does it matter?
A title search reviews the recorded history of an aircraft to confirm the seller actually owns it free and clear and can convey it to you. Because U.S. civil aircraft ownership and liens are recorded centrally with the FAA (and certain interests can also be recorded internationally), a title company or aviation attorney can pull the records and look for problems: an open mortgage or lien, a chain of ownership that doesn’t line up, missing releases from a prior sale, tax liens, or paperwork that was never properly recorded. It matters because you can buy an airplane and still inherit someone else’s debt or a clouded title if a lien was never released — a problem that surfaces later, when you try to sell or refinance. A clean title search (and clearing anything it turns up) before you fund the deal is basic due diligence on a major purchase.
What does an aircraft escrow agent do?
An escrow agent is a neutral third party that holds the buyer’s funds and the signed transfer documents and releases them only when both sides have met the agreed conditions — so neither party has to go first. A typical aircraft escrow handles the money (holding the buyer’s deposit and balance, then disbursing to the seller and to any lienholder being paid off), coordinates the signed bill of sale and registration paperwork, often runs or arranges the title search, and helps make sure existing liens get released and the new ownership and registration get recorded with the FAA. Using an established aviation title and escrow company is common practice precisely because it removes the "who sends first?" trust problem and keeps the closing organized. The escrow agent is not your attorney and does not give you legal or tax advice — they execute the agreed transaction.
How does FAA aircraft registration and the N-number work in a sale?
U.S. civil aircraft are registered with the FAA, and the registration is tied to a registration mark — the "N-number" — painted on the aircraft. When you buy a plane, ownership is conveyed by a bill of sale, and you (the new owner) file to register the aircraft in your name with the FAA; the existing registration doesn’t simply carry over to you automatically. In a typical closing the bill of sale, the application for registration, and any lien release are submitted together so the records reflect the new owner and a clear title. You can usually keep the existing N-number, or apply to reserve and assign a different available registration mark if you’d prefer one — that’s a separate request. Exact forms, fees, and processing times are set by the FAA and change over time, so confirm the current requirements (an escrow/title company or aviation attorney does this routinely) rather than relying on a number you read somewhere.
How do existing liens get released at closing?
If the seller still owes money on the airplane, there is usually a recorded lien (a lender’s security interest). To deliver clear title, that lien has to be released. In a typical escrow closing, the payoff amount is confirmed with the lienholder, part of the buyer’s funds is directed to pay off that balance, and in exchange the lienholder provides a release that gets recorded with the FAA so the lien no longer clouds the title. The escrow agent coordinates this so the seller’s loan is paid and the buyer receives the aircraft free of that lien in the same transaction. This is exactly the kind of thing a title search is meant to surface in advance: if there’s an open lien, you want it identified and a payoff/release plan in place before funds move — not discovered afterward.
Do I have to pay sales or use tax when I buy an airplane?
Possibly — it depends on where you are, where the aircraft is delivered and based, how it’s used, and the rules in the relevant jurisdiction, so there is no single answer and you should not treat anything here as a tax determination. As a general matter, buying a major asset like an aircraft can trigger sales tax or a use tax depending on the state and circumstances, and the way the transaction is structured (delivery location, basing, registration) can affect what applies. Some situations have exemptions or specific rules; others don’t. Because the amounts can be significant and the rules vary and change, the honest guidance is to get advice from a qualified tax professional and/or an aviation attorney for your specific purchase before you close, rather than assuming there’s no tax — or assuming a workaround you heard about applies to you.
Keep reading
- Aircraft Pre-Purchase Inspection: A Buyer's Checklist — the other half of due diligence: making sure the airplane itself is sound before you close.
- How Much Does It Cost to Co-Own an Aircraft? — buy-in, fixed, and hourly costs, so you can budget the whole purchase.
- All ClubHanger guides — the full library of plain-English guides for pilots.
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This guide is general educational information about the title, escrow, and closing process when buying a used aircraft. It is not legal, tax, or financial advice, and does not create an attorney-client relationship. Title, lien, registration, and tax treatment vary by aircraft, jurisdiction, use, and situation, and FAA requirements change over time. Before you close, consult a qualified aviation attorney, a reputable aircraft title & escrow company, and your own tax advisor about your specific purchase.