Likely we have all been involved in an aircraft transaction in which a new party pops up at the last minute that has not previously been part of the transaction process or known to be involved in the transaction. These last-minute revelations can affect transaction complexity and the parties’ ability to maintain the integrity of the transaction. Since spring brings the excitement of a new baseball season, a baseball analogy seemed an appropriate title for an article about transaction integrity. Who is responsible for maintaining transaction integrity?
Closing and funding aircraft transactions can become a hectic process, as all the parties work toward a successful conclusion often expected in a very short timeframe. While all desire a successful closing of the transaction, each party has its own motivation and interests. The seller wants to sell the aircraft and get paid, the buyer wants to acquire the aircraft, the brokers want to ensure their clients are buying/selling the aircraft at the right price, the attorneys want to make sure the loan documents are correct, the lender wants to ensure that they have a quality transaction where their lien is perfected, and the escrow agent wants to ensure that the closing process proceeds smoothly and timely.
At Huntington National Bank, we often ask, “Who owns risk?” Our standard answer is, “We all do.” It is much the same in aircraft transactions. All the parties have the responsibility to maintain the integrity of the transaction. Each party needs to understand who is involved and their role in the transaction. It’s not just the escrow agent’s responsibility to be diligent and understand the transaction parties and the flow of funds. Everyone must do their part to ensure transaction integrity is maintained throughout the process.
To ensure transaction integrity, here are some helpful tips from a lender’s perspective:
- Know who all the parties to the transaction are to ensure there are no surprises at closing.
- Communicate throughout the transaction process. Don’t just assume that because you understand what is going on or who is involved that all the parties to the transaction have clarity.
- Don’t just rely on the escrow agent to vet all the parties. While the escrow agent is expected to do appropriate due diligence to ensure transaction integrity and the proper flow of funds, all the other parties should do their own due diligence as well. The last thing anyone wants is for some surprise to pop up on the day of closing.
- Trust, but verify. Bad actors are becoming more and more sophisticated. The more rushed you feel, the more likely a mistake will be made. Take the time to verify all aspects of the transaction.
The answer to the question “Who’s on First?” is We ALL ARE. All parties to a transaction should work together to move the process from first, to second, to third, and hopefully all the way to home and a successful closing. When all the parties communicate effectively and are diligent in their efforts, transaction integrity is made easier and helps eliminate the potential for bad actors to insert themselves into the middle of a closing. As members of NAFA, we all bear the responsibility to ensure that the integrity of aircraft transactions is maintained to protect the clients who count on our services and products.
Greg Wallis
Vice President-Portfolio Management Team Lead
Huntington National Bank
Disclaimer: The views expressed in this article are intended for informational purposes only and should not be construed or used as legal advice nor as a solicitation of any type. Readers are advised to consult with qualified legal professionals regarding their specific circumstances and legal questions and with respect to the currency of this information. The author, the author's employer and NAFA disclaim any liability for any loss or damage incurred by readers who rely on the information provided in this article.