Aircraft Purchase Escrow (UK)

Aircraft Purchase Escrow is an arrangement used to hold funds securely during the sale, purchase or financing of an aircraft.

Instead of money passing directly between the parties, agreed sums are paid into an independent escrow account. The funds are held there and released only when the agreed conditions of the transaction are met.

Aircraft Purchase Escrow is used for the acquisition of aircraft, helicopters, engines and other aviation assets, and is common in both private and commercial aviation transactions.

Aircraft Purchase Escrow is suitable for buyers, sellers, lessors, lenders and their advisors involved in aircraft transactions.

It is commonly used where high-value assets are being transferred, where parties are based in different jurisdictions, or where technical, regulatory or financing conditions must be satisfied before completion.

Escrow is also frequently used by banks and financiers to manage funds during loan or lease closings, ensuring that payments are made only when all conditions precedent have been met.

Aircraft Purchase Escrow is typically put in place once the commercial terms of a transaction have been agreed.

It may be used to hold a purchase deposit, the balance of the purchase price at delivery, or funds linked to financing, lease commencement or payoff of existing liens.

Because aircraft transactions often involve inspections, records reviews, title searches and regulatory approvals, escrow is used to manage timing and risk while those steps are completed.

Escrow involves holding real money, independently and in advance, so that payment does not depend on a future claim being accepted.

Bonds and insurance rely on a third party promising to pay later, subject to conditions, exclusions and their own financial capacity at the time of claim.

Aircraft transactions often involve large sums, multiple parties and complex technical and legal conditions. These steps rarely complete at the same time.

Buyers may be ready to pay, but inspections, records reviews or registrations may still be outstanding. Sellers may be ready to deliver the aircraft but want certainty that funds are available. Lenders and lessors may require comfort that their conditions will be met before funds are released.

Aircraft Purchase Escrow addresses these challenges by holding funds independently until all agreed conditions are satisfied. This reduces timing risk, avoids premature payments and allows transactions to proceed in an orderly way.

Aircraft transactions often involve large sums, multiple parties and complex technical and legal conditions. These steps rarely complete at the same time.

Buyers may be ready to pay, but inspections, records reviews or registrations may still be outstanding. Sellers may be ready to deliver the aircraft but want certainty that funds are available. Lenders and lessors may require comfort that their conditions will be met before funds are released.

Aircraft Purchase Escrow addresses these challenges by holding funds independently until all agreed conditions are satisfied. This reduces timing risk, avoids premature payments and allows transactions to proceed in an orderly way.

Benefits in aircraft sale and purchase transactions

In a sale and purchase context, escrow protects both sides of the transaction.

Buyers benefit from knowing that deposits and completion funds will not be released until delivery conditions, inspections and documentation requirements are met. This reduces the risk of paying before the aircraft is properly transferred.

Sellers benefit from knowing that the buyer’s funds are committed and held securely. Once the agreed delivery and closing conditions are satisfied, funds can be released promptly without further negotiation or delay.

Escrow also helps manage cross-border transactions, where parties are in different jurisdictions and timing differences can otherwise create risk.

Benefits in aircraft financing and lease transactions

Aircraft Purchase Escrow is also widely used in financing and lease closings.

Lenders and lessors often require that funds are held securely while conditions precedent are satisfied. These may include execution of loan or lease documents, registration of security interests, payoff of existing liens or delivery of legal opinions.

Escrow allows financing funds to be placed on standby and released only when all required conditions are met. This protects lenders from funding too early and protects borrowers from funds being released without the financing structure in place.

For lessees, escrow can provide clarity around lease commencement and payment timing, reducing uncertainty during closing.

Benefits for buyers and operators

For buyers and operators, Aircraft Purchase Escrow reduces execution risk.

Funds are protected while inspections, records reviews and regulatory steps are completed. Payments are made only when the aircraft is ready to be delivered and legally transferred.

This is particularly valuable in higher-value transactions or where multiple parties and advisors are involved.

Benefits for sellers, lessors and financiers

For sellers, escrow provides certainty that funds are available and committed to the transaction. This reduces the risk of late-stage payment failure or withdrawal.

For lessors and financiers, escrow provides a controlled mechanism to manage funding risk. Funds are released only when security, registration and documentation requirements have been satisfied.

This supports disciplined closing processes and reduces reliance on informal assurances or timing assumptions.

Benefits for advisors and other stakeholders

For legal, technical and financial advisors, Aircraft Purchase Escrow provides a clear framework for coordinating complex transactions.

Escrow reduces the need for advisors to manage client money directly or to bridge timing gaps between different closing steps. It also provides a clear audit trail and a neutral reference point if questions arise during the closing process.

This can simplify transaction management and reduce the risk of disputes or misunderstandings.

Aircraft Purchase Escrow can be structured in different ways, depending on the nature of the transaction. There is no single standard model.

In sale and purchase transactions, escrow is commonly used to hold the buyer’s deposit and the balance of the purchase price at delivery.

In financing or lease transactions, escrow is often used to hold loan or lease funds pending satisfaction of closing conditions. This may include payoff of existing liens, registration steps or delivery of required documents.

Escrow can also be used to hold additional amounts, such as funds for rectification items, agreed post-delivery works or other transaction-specific obligations.

Yes. Aircraft Purchase Escrow arrangements are frequently tailored to reflect the complexity of aviation transactions.

For example, one escrow account may be used to hold the purchase deposit, while another holds the balance of funds at delivery. In finance or lease transactions, escrow may be combined with sale escrow to support a coordinated closing.

Release conditions, timing and documentation requirements can all be adjusted to align with inspections, registrations, financing steps and delivery mechanics. Advisors often recommend bespoke escrow structures where multiple parties or jurisdictions are involved.

All escrow arrangements are administered through the dospay digital escrow portal.

The portal provides a single place where authorised parties can view account balances, payment history and escrow status. It also supports the submission and tracking of information required for payments or releases, in line with the escrow agreement.

Using a digital portal reduces reliance on email chains and manual reconciliation. It improves transparency and creates a clear audit trail for payments and releases. Advisors often find this helpful when reviewing payment history or responding to queries during the life of the project.

In practice, Aircraft Purchase Escrow works by holding funds independently while the technical, legal and regulatory steps of the transaction are completed.

The buyer, borrower or lessee pays agreed sums into escrow. Those funds remain held while inspections, records reviews, registrations and document signings take place.

Once the agreed conditions are met, funds are released in line with the escrow agreement. If conditions are not met, the funds remain held until the position is resolved under the agreed process.

The aircraft sale agreement, lease or financing documents continue to govern the transaction. They define the commercial terms, delivery requirements and legal obligations of the parties.

The escrow agreement sits alongside those documents. It deals only with how funds are held and when they may be released. Release conditions usually mirror key steps in the transaction documents, such as delivery, execution of documents or completion of registration steps.

The escrow agent does not assess technical compliance or interpret transaction documents. It releases funds only when the agreed conditions are met.

Only parties authorised under the escrow agreement can give instructions to the escrow agent. This is agreed at the outset and documented clearly.

Instructions are usually tied to specific events, such as the issue of a certificate, confirmation of a milestone or the occurrence of a payment default. The escrow agent checks that the instruction matches the agreed conditions before acting.

This approach ensures that payments are controlled, predictable and not dependent on informal requests or unilateral decisions by one party.

Only parties authorised under the escrow agreement can give instructions to the escrow agent. This is agreed and documented at the outset.

Instructions are typically linked to specific events, such as confirmation of delivery, completion of inspections, satisfaction of financing conditions or registration of interests.

The escrow agent checks that instructions match the agreed conditions before acting. Informal or unilateral requests are not accepted.

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Below is a practical view of the steps that parties typically follow when using Aircraft Purchase Escrow.

1. Pay funds into escrow
   The buyer, borrower or lessee pays the agreed deposit or transaction funds into the escrow account.
2. ‍Funds held while conditions are completed
   Funds remain held while inspections, records reviews, registrations, document signings and financing steps are carried out.‍
3. Confirm delivery and completion steps
   The parties confirm that the aircraft has been delivered and that the agreed documentation and registrations are complete.‍
4. Release funds in line with the escrow agreement
   Once the agreed conditions are met, funds are released to the seller, lender or other agreed party.‍
5. Handle issues or disputes if they arise
   If there is uncertainty or disagreement, the funds remain held while the agreed process is followed.

Setting up an Aircraft Purchase Escrow account starts with understanding the transaction and how funds are intended to move. This includes whether the escrow will hold a deposit, completion funds, financing proceeds, or a combination of these.

Once this is agreed in principle, an escrow agreement is prepared. This document aligns with the aircraft sale agreement, lease or financing documents and sets out how funds will be held and when they may be released.

At the same time, we begin the account opening and onboarding process. These steps run in parallel so that the account is ready in time for deposit and closing.

The time needed to open an Aircraft Purchase Escrow account depends on the parties involved and the structure of the transaction.

For straightforward transactions, account opening can usually be completed within a short period once the required information has been provided and the escrow agreement is agreed. Transactions involving offshore ownership, multiple jurisdictions or financing structures may take longer.

Most delays arise from incomplete information rather than from the escrow process itself.

To open an Aircraft Purchase Escrow account, standard onboarding checks are required. These are similar to the checks required when opening a bank account or instructing a law firm.

This usually includes confirming the identity of authorised individuals, the ownership and control of the buyer, seller, lender or lessor entities, and the source of the funds being paid into escrow.

We may also need high-level information about the aircraft and the transaction so that the escrow account is set up correctly.

The following information is typically required to open an Aircraft Purchase Escrow account:

• Details of the buyer, seller, lender or lessor
• Identification information for authorised individuals
• Corporate documents showing ownership and control
• Source of funds information for escrowed amounts
• Details of the aircraft and transaction structure
• Agreed deposit and completion mechanics
• Target dates for delivery and closing

Providing this information clearly and early helps ensure the account can be opened without unnecessary delay.

An Aircraft Escrow account is funded by the buyer, borrower or lessee, depending on the transaction.

In a sale and purchase transaction, the buyer pays the agreed deposit into escrow once the sale agreement is signed. The balance of the purchase price is then paid into escrow at delivery.

In a financing or lease transaction, loan or lease proceeds may be paid into escrow pending satisfaction of closing conditions. The funding approach is set out clearly in the escrow agreement.

Payments from an Aircraft Purchase Escrow account are made only when the agreed release conditions are met.

These conditions are set out in the escrow agreement and usually reflect key steps in the transaction, such as delivery of the aircraft, execution of documents, registration of interests and satisfaction of financing conditions.

When a release request is made, we check that the agreed conditions have been satisfied before releasing funds in line with the escrow agreement.

If instructions are disputed or unclear, we will not release the funds.

Instead, the funds remain held safely in the escrow account while the parties follow the process set out in the escrow agreement. This may involve clarification, confirmation from an agreed third party, or the use of the dispute resolution process under the underlying contract.

This approach protects both parties. It ensures that money is not released prematurely and that funds remain available once the position is resolved.

If a party to the underyling contract becomes insolvent, we continue to operate under the escrow agreement.

Because the funds are held in escrow and not in the control of either party, they are protected from being used for other purposes. We will follow the agreed instructions and any applicable insolvency process, as set out in the escrow agreement.

In practice, this can provide greater certainty than relying on funds held directly by one of the parties, particularly where payment timing or entitlement is being considered as part of an insolvency situation.

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What happens if DOS & Co. becomes insolvent?

All escrow funds are segregated (kept separate from our own funds), safeguarded (protected by law from our own creditors) and kept liquid and unencumbered at the Bank of England. In the event of our insolvency, we have set aside regulatory capital that will be used by our administrators to 'unwind' our affairs - this will usually involve working with the parties to agree the identity of a new escrow agent who will 'step in' to carry out our obligations under the escrow agreement.