Pre-Buys: Avoiding Turbulence

Once the purchaser and vendor sign the Agreement for Sale, the aircraft needs to be inspected and repaired to the satisfaction of the purchaser and at the expense of the vendor. That's called a "pre-buy", and pre-buys can be turbulent times. Guy Landry explains.

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A pre-buy is a process, which begins long before an aircraft lands at the designated facility where the inspection will be carried out.

Once the negotiations have been done and the sales contract has been signed by both parties, and in most instances the full amount of the purchase price is safely stowed in an escrow account, the hunt begins for a maintenance facility to perform the work.

There are lots of factors to consider in choosing the facility. They need to have the space for you, so availability is key, but it's not the only factor to consider. They'll need to be equipped for everything a pre-buy can demand and believe me, a pre-buy without surprises is a needle in a haystack.

If, for example, the aircraft will be changing its registration marking, then you'll need a facility with a paint shop. If the purchaser is planning to do a refurbishment or an upgrade to the CMS or even avionics, that may be taken into consideration too. 

Both parties need to mutually agree beforehand as to where the pre-buy inspection will be performed, as well as the scope of work that will be performed. That isn't always an easy agreement either, because oftentimes the purchaser will push for a facility that has never seen that particular business jet before. The purchaser foots the bill for the pre-buy inspection, similar to having a building inspector take a look at a house in real estate. And unlike home sales where both parties often negotiate who will pay for the repairs, with a pre-buy the vendor pays for any discrepancies that are found, unless, of course, those particular issues are under warranty.

Once they've agreed on who, what and where, the Purchase Order is signed, and the slot is reserved.

Like home buying, the transition of a business jet from the vendor to purchaser can be full of pressure and rife with nerves. There are lots of people involved (outside of the facility doing the work) and the more people there are, the more room there is for debates, discussions and frustration. There are the vendor's people, the purchaser's people, the lawyers who represent both, perhaps financial institution, definitely the salesman awaiting his commission -- and perhaps other vendors and purchasers either supplying a new aircraft to the vendor of this aircraft, or buying a used one from the purchaser who may be making a step up to a bigger aircraft with more space and better range.

Having one person managing the project and assuming responsibility for the flow of all the information and documentation flying around during pre-buy can contribute greatly to a smooth transition.

In the next instalment about Pre-Buys, I'll look at what happens once the aircraft arrives at the facility.