Buying&Selling 1.qxp_Finance 23/11/2021 09:12 Page 1
BUYING & SELLING AIRCRAFT
Tips on Resolving Pre-Purchase Inspection Disputes How are pre-buy inspection disputes in pre-owned business aircraft deals resolved? Better still, how are they avoided? Chris Kjelgaard receives insights from an aviation legal counsel, a technical inspection expert, and an aircraft broker and buyer’s agent...
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uying a pre-owned business aircraft is an expensive and complex proposition, as you would expect when the purchase of such a sophisticated and valuable asset is involved. For the seller and buyer alike, various pitfalls and technical issues found during the prepurchase inspection can add substantially to the cost and time needed to close the deal. In some (though not many) cases, differences of opinion between the two parties or unexpected condition problems can cause the desired transfer of ownership to derail completely. It is in the interests of both the seller of the aircraft and its putative buyer — and their respective intermediaries — to do their utmost to minimize the chances of a critical dispute arising between the two principals when the pre-buy inspection is performed. If such a dispute does arise during the inspection, it is equally incumbent upon the parties to do as much as they can to resolve the dispute amicably, or at least successfully. The simplest way to ensure that a pre-purchase inspection dispute is resolved is to take steps to prevent it from arising at all. That’s best 40 Vol 25 Issue 12 2021 AVBUYER MAGAZINE
accomplished when the transaction principals and their representatives make sure that the purchase agreement is very comprehensive, detailing the agreed specifics of every facet of the deal. These will include the identity of the inspection facility that will perform the pre-buy inspection; what the parties will accept as evidence the aircraft is fully airworthy; the expected duration of the transaction; and the remedies the seller and buyer can seek if the other principal defaults. The contract will also include a host of other terms and conditions which will all bear on the deal being able to close successfully.
The Letter of Intent Stage
Negotiation of the basic terms of the purchase agreement should begin even at the initial Letter of Intent (LOI) stage of the deal, before the principals agree upon the definitive purchase contract between them, says Scott Burgess, Founder of Fort Lauderdale-based Aviation Legal Group. One critically important point which must be specified in the contract is the identity of the facility which will carry out the pre-purchase inspection. www.AVBUYER.com
