By Vincent Wigmans
The International Registry of Mobile Assets (IR) went into effect in 2006 and operates under the legal framework of the Cape Town Treaty. This IR was established to provide an electronic system that records the interests in airframes, aircraft engines and helicopters. An IR registration is required when an aircraft/helicopter is being financed. The lender wants to secure his lender rights and place the transaction therefore in the IR.
Qualifications for the International Registry
To have your transaction registered in the IR your acquisition/sale should qualify in one of these four categories:
- Fixed wing aircraft with at least eight seats (incl. crew)
- A helicopter with at least five seats (incl. crew)
- Jet propulsion aircraft engines that produce at least 1750 lb of thrust
- Turbine powered or piston powered aircraft engines with at least 550 take-off horsepower
Next to these qualifications, the buyer/debtor must be in one of the contractor states. The Cape Town Treaty excludes propellers, avionics and other aircraft/helicopter parts and accessories for registering.
How does it work
Basically, there are multiple ways to handle this registration with the IR. A Transacting User Entity (TUE) must have a paid user license, this means the lender, buyer and seller. You can also choose to use a Professional User Entity (PUE), this can be an Escrow company, for instance. The lender, buyer and seller can also appoint the same PUE and that entity will handle all the necessary registrations. As an Escrow company is mostly involved in the sale of an aircraft, that falls in one of the four categories, it can be an easy add-on to the service of the Escrow they already provide.
Some Escrow companies are also offering a “Closing Room”, which means that the Escrow company, which is the coordinator, set up a virtual space and makes sure that the interests of the lender, buyer and seller are met. They hold all registrations till they have the final acceptance of all parties to proceed. Once the Escrow company receives the green light from all parties, they will release all the registrations and file the aircraft. The advantage of a “Closing Room” is that the steps can be done simultaneously, which lowers the transaction time. They will also take care of the FAA fillings when it concerns an FAA registered aircraft.
However, the IR registry should be a common practice during every aircraft transaction but there are some hick-ups. We can say from experience that the system works good for US registered aircraft, but for EASA registered aircraft we see some challenges. Therefore, it is always recommended to ask the CAA of the country where the aircraft is registered if there is a loan or mortgage on the aircraft. You want to be 100% sure that the deal can be performed fluently without any withheld matters before closing.