An aircraft transaction confronts the parties with a classic trust problem: the seller will not transfer title before receiving funds, the buyer will not pay before receiving title. An escrow agent resolves this by ensuring simultaneity of exchange. Below we cover how it works and what to look for when choosing an agent.
What an escrow agent does
It is an independent third party with which buyer and seller sign a separate agreement. The agent receives the buyer's funds into a dedicated account and simultaneously receives the closing documents from the seller, including the bill of sale.
The key point: the agent releases neither side's asset until both parts are in hand. With funds in the account and documents held, a simultaneous exchange occurs — the buyer receives confirmation of title, the seller receives the money. That is the moment of closing.
The agent charges a small percentage of value or a fixed fee. Against the price of the aircraft that is an incomparably small amount relative to the risk it removes.
What passes through escrow
Beyond funds and the bill of sale, the agent typically handles lien release documents, confirmations of no encumbrances, releases from previous lenders, and documents for registration in the new registry.
A separate function is work with the international registry under the Cape Town Convention. The agent often acts as a professional user of the registry and makes all registrations for the transaction simultaneously at closing, which fixes the priority of the new owner's rights.
Some agents combine escrow with title company services: verifying the chain of ownership, the history of encumbrances and the cleanliness of title. These are distinct functions and their availability is confirmed in advance.
Deposits and stages
Escrow is used at more than closing. The refundable deposit under a letter of intent and the subsequent non-refundable deposit under the main contract are also placed in the escrow account rather than paid directly to the seller.
Release conditions are set out in the agreement: under what circumstances the deposit returns to the buyer, when it passes to the seller, and what happens on withdrawal following inspection findings.
That is why the agreement with the agent is read carefully: it determines the outcome in a dispute, when the parties interpret events differently.
How to choose an agent
The first criterion is specialisation in aircraft transactions. A general escrow agent from another sector does not know the specifics: registry filings, the international registry, aircraft documentation.
The second is independence from both parties. An agent affiliated with the seller or their broker loses its purpose as guarantor. The third is reputation and experience: an agent that regularly closes transactions of this size anticipates the typical complications.
The fourth is geographic applicability: the agent must work with the registration jurisdictions involved and understand the procedures of the specific registries.
Closing location and tax
Escrow mechanics connect to the choice of closing location. Parties often close in a third country so that neither incurs tax where the aircraft happens to be at the moment title transfers.
The aircraft physically flies to the agreed closing location after inspection and rectification. This too is coordinated through the agent, since the moment of title transfer must coincide with the agreed position of the aircraft.
The tax side is handled by lawyers, but the escrow agent executes the technical part — fixing the time and place at which title passes. An error in coordination can create a tax liability where none was planned.
Currency and transfer timing
A practical layer rarely discussed in advance. The settlement currency is fixed in the contract, and changing it at closing requires re-signing. Exchange movement on a large sum over a few days can run to hundreds of thousands.
Transfer times depend on banks and jurisdictions: a domestic transfer clears in hours, an international one with compliance checks in days. The closing date is set accordingly rather than by the parties' calendars.
Who bears bank charges and conversion losses is recorded separately: at this scale it is not a detail but a line item.
What can go wrong
Typical closing problems rarely involve the agent itself. More often it is an undischarged registry entry found at the last moment, inconsistent aircraft details across documents, a signatory without authority, or a delayed bank transfer due to compliance checks.
The last deserves separate attention: a large cross-border transfer undergoes checks that can take days. The buyer's bank and the agent's bank are warned in advance, otherwise closing slips for reasons unrelated to the transaction itself.
The second common source of delay is unresolved differences between the parties over inspection findings. An escrow agent is not an arbitrator: it executes what the agreement says and does not resolve disputes on their merits.
Escrow on a sale
For a seller escrow solves the mirror problem: it confirms the buyer actually has the funds. A deposit in the agent's account demonstrates serious intent better than any assurance.
A seller should watch the same clauses: release conditions if the buyer withdraws, allocation of the agent's fees, timelines. The agreement is signed by both parties and protects both.
What happens after closing
The moment of exchange is not the end of the process. It is followed by registration in the chosen registry, issue of a certificate of airworthiness, customs clearance where required and placing the aircraft with an operator.
Some of these steps can only be taken after title passes, so time elapses between closing and the new owner's first flight. It is built into the plan in advance, particularly if the aircraft is needed by a specific date.
Insurance is handled separately: the new owner's policy must take effect exactly at the moment title passes, with no gap. Coordinating that moment falls to the agent and the broker.
Typical closing delays
Transaction experience shows several recurring reasons for a date slipping. The first is undischarged security interest entries: the previous lender has not issued a release, and the agent cannot complete the exchange.
The second is discrepancies between documents: serial or tail number stated differently in the bill of sale, the contract and the registration papers. Formally trivial, practically a halt until corrected.
The third is signing authority, particularly with a complex ownership structure spanning several jurisdictions. The fourth is currency control and payment clearing times, which in a cross-border transaction take longer than parties expect.
All four are prevented the same way: documents are gathered and reconciled in advance, not on the closing day.
What to verify before closing
Consistency of aircraft details across all documents: tail number, serial number, configuration. Absence of undischarged entries in the international registry. Signing authority on both sides. Consistency of amount and currency with the contract terms.
JetHunter is approved with the main escrow agents and runs the transaction through to closing: document preparation, coordination with the agent, registry filing and aircraft handover. The aim is that the moment money and title change places passes without surprises for either side.
«Escrow solves a single but fundamental problem: nobody hands over their side first. Money and title change places in the same instant, and that is what makes a deal possible between parties who do not know each other.»
— Alexey Mordvintsev, CEO of JetHunter
Author: Alexey Mordvintsev, CEO of JetHunter, President of the Association of Professionals of Executive Aviation Industry (APIDA). Over 14 years in the industry.
