Deposit and escrow when buying an aircraft

The buyer has found an aircraft, agreed the price and received the seller's bank details. This is where the part of the transaction begins in which a single mistake costs more than the whole discount negotiated earlier.

Money for an aircraft moves through a third party. Here is who chooses it, at what moment the deposit leaves, on what conditions it comes back, and where buyers lose money most often.

Who the escrow agent is

An independent company that holds the buyer's money and the seller's documents until the agreed conditions are met. It has no interest of its own in the deal, and its fee is fixed.

It works under a tripartite agreement: buyer, seller, agent. The agreement lists the events on which the money goes to the seller, those on which it returns to the buyer, and who confirms them.

At what point the deposit is paid

After the documents have been studied and before the pre-purchase inspection. By this point the buyer holds the airframe and engine logbooks, the history of aviation events and the status of the maintenance programmes.

A letter of intent is signed: price, inspection procedure, who pays for what, the exclusivity period. The deposit goes to the escrow agent's account and the aircraft comes off the market for the agreed term. Negotiating the wording takes anything from two days to two weeks.

The key point here: the money sits with the agent, the seller does not see it. Whether the deposit is refundable up to acceptance of the aircraft is written into the agreement as a separate clause. That is the buyer's negotiating position, and it has to be won before the money is transferred.

What happens when a party withdraws

The buyer withdraws on the results of the inspection — the deposit is returned, provided the grounds are set out in the agreement in advance, as a list.

The buyer withdraws with no grounds — the deposit stays with the seller as compensation for taking the aircraft off the market.

The seller refuses or misses the deadlines — the deposit goes back to the buyer. The same clause covers reimbursement of the inspection costs already incurred.

The parties fail to agree on the inspection findings — the most common scenario. The procedure for resolving disagreements has to be in the agreement: who prices the work, within what time the parties respond, what happens if no agreement is reached.

What conditions get written in

▪️ The amount of the deposit and the deadline for paying it.

▪️ The list of grounds for a refund, each in verifiable wording.

▪️ The exclusivity period: how long the aircraft is off the market.

▪️ Who chooses the service centre, who pays for the positioning flight and for the inspection.

▪️ The procedure for working through the findings and the response times for each party.

▪️ The conditions on which the agent releases the money: whose signatures, which documents.

▪️ Governing law and the dispute resolution procedure.

Typical mistakes

▪️ Transferring the money straight to the seller. Getting it back turns into litigation in someone else's jurisdiction.

▪️ An unconditionally non-refundable deposit before the inspection. The negotiating position drops to zero, and every finding turns from an argument for a discount into your own problem.

▪️ Vague grounds for withdrawal. The wording "unsatisfactory condition" works in favour of whichever side has the stronger lawyers.

▪️ An escrow agent proposed by the seller and connected to him. The agent is chosen jointly, from companies with a track record in the business jet market.

▪️ No deadline for a response. A seller under no obligation to reply within five days replies in three weeks, and the exclusivity period is running.

▪️ The slot at the service centre not booked before signing. The inspection starts when the centre is free, and the clock on the agreement is already running.

I have more than twelve years in aviation behind me: five in leasing, seven in business aviation. Buying, selling and financing aircraft is my daily work — the deals have covered Bombardier Global, Embraer Legacy, Airbus Helicopters machines and the Mi-8. I talk a client out of a purchase that does not add up as a matter of principle.

How this maps onto the schedule

▪️ Letter of intent and deposit — up to two weeks.

▪️ Pre-purchase inspection — from two weeks to a month and a half.

▪️ Closing, with settlement through escrow and registration — from a week to a month.

▪️ The whole transaction from first enquiry to the first flight with passengers — three to six months.

Work the exclusivity period out from these figures, with margin for the queue at the service centre.

The speed of the market for the type shapes the negotiation over terms. To my information, average time on market is 72 days for the Challenger 350, 165 days for the Challenger 300 and 112 for the Gulfstream G650. The seller of a liquid aircraft holds terms harder: the next buyer will come along quickly.

The timings and figures here are a reference point. The terms of a particular deal are worked out from the particular aircraft, the jurisdictions of the parties and the text of the agreement; the wording for signature is prepared by a lawyer.

Alexander Filimonov — business aviation: sourcing, purchase and entry into service of aircraft.

We go through the candidates' documents and the terms of the agreement before the deposit is paid: https://grok.flights/go/tc-zadatok