January/February 2023 - 40

LEGAL MATTERS
as a matter of federal law you must also file the lien with
the FAA Civil Aviation Registry.
That being said, however, federal law does not preempt
state law rules on how you create the lien, perfect the lien
or the priority of your lien. That will all be dictated by
your specific state law. Simply put, your applicable state
law will provide the relevant procedural and substantive
requirements regarding how to create and perfect the lien
at the state level, whereas federal law requires that you also
file the lien with the FAA Civil Aviation Registry. The
FAA will not make any determination as to the validity
of the lien under the applicable state law; it merely accepts
the filing and records it on the FAA's database.
Do I need to file my lien on the International
1213766808 | FJZEA | GETTY IMAGES
Is possession of the aircraft required in order to
perfect a lien? The short answer is: it depends on the
jurisdiction. Some states require you to have possession
in order to exercise a lien right while other states do not
require possession. California and New York are examples
of states that require possession of the aircraft in order
to have a valid lien. See Cal. Code Civ. Proc. §1208.61,
N.Y. CLS Lien §184. Contrast this with Idaho, Florida and
Texas, which do not require possession of the aircraft. See
Id. Code §45-1102(2)(b), Tex. Prop. Code §70.302, and
Fla. Stat. §329.51.
Are you required to provide the aircraft owner
with notice of the lien? Most state statutes will require
that you provide the aircraft owner with notice of the
lien within a certain number of days after filing the lien.
Additionally, if a lienholder forecloses on a lien, many states
also will require the lienholder to publish in a newspaper
or provide other public notice of the date and time of the
foreclosure auction in advance.
Do you need to record your lien with the applicable
state? It depends on the jurisdiction. If the applicable
state lien statute requires you to record the lien with the
state, you must follow the specific process for recording
the lien as set forth in the state statute.
Do you need to record your lien with the FAA?
Yes. The purpose of the FAA Civil Aviation Registry was
to create " a central clearing house for recordation of titles
so that a person, wherever he may be, will know where
he can find ready access to the claims against, or liens,
or other legal interests in an aircraft. " (Internal quotation
marks omitted.) Philko Aviation v. Shacket, 462 U.S. 406,
411. In light of this, federal law preempts state law in terms
of where to file your lien. In short, even if your state's law
requires you to file your lien with a particular state agency,
40 \ AIRPORT BUSINESS / JANUARY/FEBRUARY 2023
Registry? The International Registry operates under the
Cape Town Convention and the Aircraft Protocol adopted
on November 16, 2001, at Cape Town, which provides
for the registration and protection of international interests
that are recognized by ratifying states. The International
Registry provides a mechanism by which to file priority
interests in certain aircraft and component parts on an international
level. Only certain specific types of aircraft and
component parts qualify for registry on the International
Registry. Although it is not required to record a lien on
the International Registry, if the aircraft qualifies, it could
be advisable to file on the International Registry to further
protect your priority interest in the lien.
Are there risks to the lienholder in filing a lien?
Before you proceed with filing a lien against an aircraft,
consider the risks. Asserting a lien without a legal basis or
without complying with an applicable statute could expose
the party filing the unlawful lien to civil claims for fraud,
tortious interference and replevin. In certain situations,
it also could expose the filing party and/or its attorney
to potential criminal liability. As long as you are acting
in good faith and without malice, you should be able to
avoid legal liability. Notwithstanding that, you likely will
be required to retain counsel to defend the claim and assist
in navigating the legal proceedings. In addition to the legal
and defense costs, it is important to consider the risk to
your reputation and what impact having exercised the lien
may have on your business.
The best advice is to make sure you identify the applicable
state statute and make sure you understand the statute
in order to follow the requirements exactly. Also be sure
to file the lien on the FAA Civil Aviation Registry. 
This article was co-authored by Paul M. Grocki,
Esq. Grocki regularly represents purchasers and sellers
in the buying, selling, and financing of aircraft of
various sizes, including creating and registering holding
entities, minimizing sales and use tax, and federal compliance
issues concerning use and ownership. He also routinely represents
both lienholders and aircraft owners in addressing issues relating
to liens placed on aircraft.
January/February 2023

Table of Contents for the Digital Edition of January/February 2023
