How do you check a luxury asset is free of liens before you pay?

You check that a luxury asset is free of liens by searching the public record that fits the asset (an aircraft registry, a vessel registry, a motor-vehicle title, a secured-lending filing index or a theft database), and then by making the contract cover what no search can show: a seller's warranty of title, a written payoff or release from any lender, and a payment that sends the lender its money directly out of the price. No single search covers an aircraft, a yacht, a car, a painting and a watch, and no search is complete on its own.

The registries described here are mainly those of the United States, named as such each time, with the United Kingdom given as a point of comparison. Registries and priority rules differ from one country to the next, and inside the United States from one state to the next. This article is general information, not legal advice: on a purchase of this size, the searches are normally ordered and read by a lawyer, a title company or an escrow agent who does it every week.

The order of work matters as much as the searches. A buyer who pays first and searches afterwards has turned a question about the asset into a claim against a seller who already has the money.

What are a lien, a security interest and a title defect?

A lien is a claim on an asset that secures a debt, a security interest is a lien the owner granted by contract to a lender, and a title defect is any reason the seller may not be the full owner able to sell. The three are different problems, they are found in different places, and a buyer has to clear all three.

A security interest is the voluntary kind. The owner borrowed money and signed an agreement giving the lender rights in the aircraft, the yacht or the painting if the loan is not repaid. A chattel mortgage, a preferred ship mortgage, a conditional sale contract and a loan secured on an art collection are all versions of it.

A lien in the wider sense also covers claims the owner never agreed to. A tax authority may hold a lien for unpaid tax. A repair shop, a hangar, a shipyard or a storage facility may hold a lien for unpaid work or unpaid storage, and in many places that lien arises by operation of law, with no document signed by the owner. A court judgment against the owner may attach to the owner's property.

A title defect is about ownership itself. The seller may be one of two co-owners, an heir before the estate is settled, a spouse selling without the other, a company officer without authority to sell, or a person who bought from someone with no right to sell. A stolen object is the hardest case: under the Uniform Commercial Code, the model law adopted by the states of the United States for sales of goods, a buyer generally receives the title the seller had or had power to transfer, and a thief has none to give.

The practical difference is where each one shows up. A security interest is the most likely to be recorded somewhere. A lien that arises by law is often unrecorded. A title defect appears in the chain of ownership documents, or in a loss database, or nowhere at all until the true owner comes forward.

Why does paying the seller not clear a lien?

Paying the seller does not clear a lien because the lien is attached to the asset, not to the seller, and it follows the asset into the buyer's hands unless the lender agreed to let it go. The buyer's payment discharges the buyer's debt to the seller; it does nothing to the seller's debt to the lender.

The Uniform Commercial Code states the rule in one line for the United States: a security interest continues in collateral notwithstanding its sale, unless the secured party authorised the disposition free of the security interest. The lender also gains a claim on the sale proceeds, but that claim is in addition to its rights in the asset, not a replacement for them.

A buyer who pays the full price to a seller with an unpaid loan therefore relies on the seller to forward the money. If the seller does not, the lender may still enforce against the aircraft or the car, and the buyer is left to recover the price from the seller under the contract.

There are exceptions, and they are narrower than buyers assume. Under the same code, a buyer in the ordinary course of business takes free of a security interest created by the seller, which protects a person buying from a dealer's stock. A private sale between two individuals or two holding companies is usually not that case. A second exception protects a consumer who buys consumer goods from another consumer without knowledge of the interest and before a financing statement covering the goods is filed, and it does not help a buyer acquiring through a company or for investment. The safe assumption in a private sale is that a valid lien survives the sale.

Where are interests in each type of luxury asset recorded?

Interests in luxury assets are recorded in a registry tied to the object for aircraft, registered vessels and titled vehicles, and in an index tied to the debtor's name for almost everything else, including art, watches and jewellery. The table sets out the position in the United States, by asset type, with what to request in each case.

The split between the first three rows and the last two is the main thing to take from the table. An aircraft, a documented vessel and a titled car can be searched by the object. A painting or a watch can only be searched by the people who have owned it, which makes the chain of ownership a search input and not only a matter of provenance.

How do you search an aircraft's records in the United States?

For an aircraft registered in the United States, you search the documents recorded against it at the Federal Aviation Administration Aircraft Registry and, for larger aircraft and engines, you obtain a search certificate from the International Registry created under the Cape Town Convention. The two records are separate and a full search covers both.

Federal law requires the Federal Aviation Administration to keep a system for recording conveyances that affect an interest in civil aircraft of the United States, together with leases and security instruments on specifically identified engines of at least 550 rated takeoff horsepower and propellers able to absorb at least 750 rated takeoff shaft horsepower. Until such a document is filed for recording, it is valid only against the person who made it, that person's heirs, and anyone with actual notice of it. Once recorded, it is valid against everyone from the date of filing. That is why lenders record, and why the recorded file is the first place to look.

The Federal Aviation Administration is clear about what it does and does not do. It describes clear title as the absence of any unreleased chattel mortgage, security agreement, tax lien or similar encumbrance. It states that its Aircraft Registration Branch does not perform title searches: a buyer may review the aircraft records personally or have an attorney or a title search firm do it. It also states that there is no federal requirement to file lien or security instruments with it, and that state law determines lien and security interests. The registry is a recording office, and it does not certify that a title is clean.

The International Registry adds a second layer for larger equipment. According to the Federal Aviation Administration, the objects covered are airframes type certificated to carry at least eight persons including crew or goods over 2,750 kilograms, helicopters certificated for at least five persons including crew or goods over 450 kilograms, jet engines of at least 1,750 pounds of thrust, and turbine or piston engines of at least 550 rated takeoff horsepower. Under the Convention, anyone may search the registry electronically, and the registrar issues a search certificate for an object that either lists what is registered against it, with date and time, or states that nothing is.

Two practical points follow. Engines are objects in their own right, so the airframe and each engine are searched separately by manufacturer, model and serial number, and an engine fitted to the aircraft may carry an interest that the airframe does not. A light piston aircraft below the thresholds is outside the International Registry altogether, and its file at the national registry is the only aviation record there is.

How do you search a yacht or a boat?

For a yacht documented with the United States Coast Guard, you request an abstract of title from the National Vessel Documentation Center; for a boat that is only titled or registered by a state, you search that state's record. A vessel flying another flag is searched in the ship registry of that flag.

Documentation is the federal form of registration. Under the Coast Guard's regulations, a vessel of at least five net tons wholly owned by United States citizens is eligible, and a vessel of less than five net tons is excluded. Bills of sale, mortgages and notices of claim of lien can be filed and recorded against a documented vessel, and the abstract of title is described by the National Vessel Documentation Center as a historical record of transactions and encumbrances for that vessel.

Reading an abstract takes care, because history stays on it. The Center states that filings are not removed when they expire, so an old notice of claim of lien remains visible. Under federal law a recorded notice of claim of lien expires three years after the date the lien was established as stated in the notice, and a claimant who has been paid must provide a certificate of discharge. An entry on the abstract is therefore a question to ask the seller, with a document expected in reply: a satisfaction of mortgage, a discharge, or proof that the notice has expired.

The larger limit is what never reaches the abstract. Federal maritime law gives a person who provides necessaries to a vessel on the order of the owner, or of someone the owner authorised, a maritime lien on the vessel, enforceable against the vessel itself. Recording is optional: the statute on notices of claim of lien says that it does not alter the law on how a maritime lien is established. The Center also warns that neither the filing of a notice nor its acceptance for recording is a guarantee that the claim is valid or enforceable. A clean abstract shows that nothing is recorded, which is not the same as showing that no yard, fuel supplier, marina or crew member is owed money.

For that reason a yacht purchase adds enquiries outside the registry: recent yard and marina invoices shown as paid, crew wages and fuel accounts up to date, and a seller's statement of every creditor of the vessel. For smaller boats, rules differ by state, and not every state issues a title for a boat, so the buyer asks the state agency what record exists and whether liens are noted on it.

How do you check a collector car's title?

For a car titled in the United States, you check the certificate of title and the issuing state's title record for a lienholder, because a lender's interest in a titled vehicle is perfected by notation on the title and not by a filing with the Secretary of State. The search is by vehicle identification number, in the state that issued the current title.

The Uniform Commercial Code says that filing a financing statement is neither necessary nor effective to perfect a security interest in goods covered by a certificate-of-title statute. The lender follows the state's title law instead, and its name appears on the title record. A buyer looks at three things: who is named as owner, whether a lienholder is listed, and whether a release signed by that lienholder has been recorded with the state.

The same section carries an exception that matters for collector cars. While a titled vehicle is inventory held for sale by a dealer in that kind of goods, the title-notation rule does not apply to security interests the dealer created, so a dealer's floor-plan lender is found through a debtor-name search on the dealer and not on the car's title. A buyer from a dealer in the ordinary course of business is generally protected by the rule described earlier; a buyer who is not in that position searches the dealer by name as well.

A national title-history report adds a cross-state view. The National Motor Vehicle Title Information System, a programme of the US Department of Justice, reports a vehicle's current title information, its brand history such as salvage or total loss, the latest reported odometer reading and, in some cases, historical theft data. The Department itself notes that the system does not hold everything a state may include in its title records and advises consumers to check the full state record. It is a check on the car's history and title state, not a lien search.

Older collector cars raise a separate point: some change hands on a bill of sale because the state of origin did not title vehicles of that age, or the title was lost decades ago. A missing title is not proof of a problem, and it is not proof of ownership either. The chain of bills of sale, the chassis and engine numbers and a debtor-name search on the seller then carry the weight a title would have carried.

How do you check art, watches and jewellery, which have no title registry?

For art, watches and jewellery, there is no registry of ownership, so you search for secured lenders under the seller's name, check the object against loss and theft databases, and test the chain of ownership documents. Each of the three answers a different question, and none replaces the others.

In the United States, a lender who takes art or jewellery as collateral without taking possession normally files a financing statement, often called a UCC-1, in the filing office of the state where the debtor is located, which is commonly the Secretary of State. Under the Uniform Commercial Code an individual is located at the individual's principal residence, and a registered organisation such as a corporation or a limited liability company is located in the state under whose law it was organised. The search is run under the debtor's exact legal name, in that state, and a filed financing statement is effective for five years unless continued.

Because the search is by name, the buyer needs the right names. The owner of the painting may be a trust, a holding company or a foundation and not the person at the table, and the relevant debtor may be a previous owner whose lender never released. A seller who shares the ownership history under a confidentiality agreement makes this search possible; a seller who shares no names leaves it empty.

Loss databases answer the theft question. The Art Loss Register describes its database as the world's largest private database of lost, stolen and looted art, antiques and collectibles, with more than 700,000 items, and it operates a separate register for lost and stolen watches, searched by serial number. Interpol's Stolen Works of Art database holds almost 57,000 objects according to Interpol, and can be checked by the public through its mobile application. The Federal Bureau of Investigation keeps the National Stolen Art File, with entries submitted by law enforcement agencies, and notes that not every recovery is reported back to it.

These databases record what has been reported as lost or stolen. They say nothing about a loan secured on the object, a dispute between heirs or a consignor who was never paid, and a theft that was never reported, or was reported without a usable description, is not in them.

What can every search miss?

Every search can miss interests that were never recorded, interests recorded under a different name or in a different place, and interests created after the search date. The table lists the main gaps by type of search, so that each one can be closed by a document or a contract term.

Three of these gaps deserve a word more. The first is the name problem. A debtor-name index returns what was filed under the name searched, so a search under a trading name, a former name or the name of the individual behind a company can come back clean while a filing sits under the exact legal name. Searching every name in the ownership chain, in the state that matches each one, is the only remedy.

The second is perfection without filing. The Uniform Commercial Code perfects a purchase-money security interest in consumer goods when it attaches, with no filing, apart from goods covered by title statutes. A lender or a pawnbroker who holds the object itself also has no need to file. An object that the seller cannot produce for inspection, or that sits in someone else's vault, calls for a written statement from the holder of what it is owed.

The third is geography. A filing search in one state says nothing about a loan made in another country, and a jet that spent ten years on a foreign register, or a yacht that changed flag last season, carries the history of the earlier registry with it. For an asset that has moved, the search covers each registry it has been on, and a deregistration certificate or a closed transcript from the previous registry is part of the file.

What do you check, in order, before you pay?

Before you pay, you identify the asset and the seller exactly, run the object search and the name search, clear every entry with a document, and repeat the searches just before closing. The sequence below works for any of the five asset types; the registry named in step three changes with the asset.

Steps one and two look administrative and decide the value of everything after them. A search run on a serial number copied with one wrong digit, or on a company name missing a word, produces a clean result about the wrong thing.

Which contract protections back the searches?

The contract backs the searches with four protections: a seller's warranty of title, a lien release or payoff letter from each creditor found, payment of that creditor directly out of the price, and a bill of sale that transfers the asset free of encumbrances. The searches reduce the risk; these terms allocate what remains.

A warranty of title is implied in a sale of goods in the United States. Under the Uniform Commercial Code, a seller warrants that the title conveyed is good and its transfer rightful, and that the goods are delivered free from any security interest or other lien or encumbrance of which the buyer had no knowledge at the time of contracting. The same section allows the warranty to be excluded by specific language, or by circumstances showing that the seller sells only such right as it has. A buyer therefore reads the draft for wording that sells "all right, title and interest, if any" or sells "as is" with respect to title, and asks for an express warranty that the seller is the sole owner, has authority to sell and transfers free of all liens and claims.

A warranty is a promise by the seller, worth what the seller is worth after closing. It matters most when the seller is a substantial person or company in a place where a judgment can be enforced, and least when the seller is a single-asset company that will hold nothing once the asset is sold. In that case a guarantee from the person behind the company, or a part of the price kept back for an agreed period, gives the warranty something to stand on.

A payoff letter comes from the lender and not from the seller. It identifies the loan and the collateral, states the amount needed to pay the loan in full on a given date, gives a daily figure for each day after it, provides payment instructions, and commits the lender to release its interest on receipt. A lien release is the document that follows: a release recorded with the aviation registry, a satisfaction of mortgage for a vessel, a lien release on a vehicle title, or a termination of the financing statement. For aircraft, the Federal Aviation Administration accepts a release signed by the secured party on its own recordation notice or a separate document that identifies the collateral and the lien.

Payment of the lender directly out of the price is what connects the two. The contract states that the buyer, or the closing agent, pays the payoff amount to the lender and the remainder to the seller, so that the money that clears the lien never depends on the seller forwarding it. Payment instructions for the lender are confirmed with the lender through a contact obtained independently of the email that carried them.

The bill of sale closes the file. It names the seller exactly as the registry does, describes the asset by the same identifiers used in the searches, states that the asset is transferred free and clear, and is signed by the person whose authority was checked. Where a registry exists, the bill of sale is drafted in the form that registry will accept for recording.

How is the price paid when part of it must go to the seller's lender?

When a lender must be paid out of the price, the price is divided at closing between the lender, the broker, any closing costs and the seller, on a statement that every party approves before the buyer's money moves. The worked example below is illustrative and uses a pre-owned aircraft bought privately in the United States.

The assumptions are these. The price is $2,400,000. The buyer paid a 5% deposit of $120,000 to an aviation escrow agent when the contract was signed, leaving a balance of $2,280,000. The registry search shows one recorded security agreement in favour of the seller's lender, and the lender's payoff letter gives $1,136,250 good through the closing date, plus $187.50 for each day after it. The seller owes its broker 4% of the price under the listing agreement, which is $96,000. The escrow agent's fee is $3,000, shared equally, so $1,500 each.

The total paid out equals what the buyer puts in: the $2,400,000 price plus the buyer's $1,500 half of the escrow fee. With the deposit already held, the buyer sends $2,281,500 at closing. The seller's net is the price less the payoff, the commission and the seller's half of the fee: $2,400,000 minus $1,136,250, $96,000 and $1,500, which is $1,166,250. The lender receives a little over 47% of the price and the seller a little under 49%.

The daily figure in the payoff letter is what makes the date matter. If closing slips by three days, the payoff rises by three times $187.50, or $562.50, to $1,136,812.50, and the seller's net falls by the same amount to $1,165,687.50. The buyer's total does not change. A statement prepared on an out-of-date payoff leaves the lender short by a small sum, and a lender that is short does not have to release.

The sequence at closing is as important as the amounts. The lender's release is delivered to the escrow agent to be held until the payoff is received, the bill of sale is held the same way until the price is received, and the documents are released and filed as the money is paid out. No party gives up its position before the others have performed.

Where the parties settle the price onchain, the same division can be fixed in advance. Shaka is a payment router: each party's share is agreed, and can be signed by each recipient, before the buyer pays; the buyer pays once; every party is paid at the same moment; and the payment is final. Shaka routes the payment and never holds the funds. It does not run searches, hold documents or record releases, which remain the work of the lawyer, the title company or the escrow agent handling the closing.

Which findings should stop the payment until they are explained?

A finding should stop the payment when the record and the seller's account do not match, or when the seller declines a step that an owner with clean title has no reason to decline. Each item below is an exception to be documented and resolved, and most have an ordinary explanation.

• Name mismatch. The registered owner, the name on the contract and the name on the receiving bank account are not the same legal person, and no document explains the link.
• Unreleased entry. A mortgage, security agreement or notice of claim of lien appears on the record with no release, and the seller describes it as paid without producing the creditor's confirmation.
• Payment diverted from the creditor. The seller asks for the full price to be paid to it, or to a third party, and proposes to settle its lender afterwards.
• Payoff letter not from the lender. The payoff figure or the lender's payment instructions arrive only through the seller, cannot be confirmed with the lender directly, or change shortly before closing.
• Identifier discrepancy. A serial, hull, chassis or movement number on the object differs from the documents, has been altered, or is not available for inspection.
• Gap in the chain. A period of ownership is undocumented, a prior owner cannot be named, or the asset recently changed registry, flag or state without closing documents from the previous one.
• Title warranty removed. The draft contract excludes the warranty of title or offers only such interest as the seller may have, at a price that assumes clean title.
• Asset held by a third party. The object is in the possession of a lender, a storage provider, a restorer or a consignee who has not confirmed in writing what it is owed.
• Pressure on timing. The seller sets a deadline that leaves no time to obtain the search results or to repeat them before payment.

One finding on this list is a reason to ask for a document. Several together, with a seller who will not supply the documents, are a reason not to pay on the terms offered.

What changes outside the United States?

Outside the United States, the method is the same and the registries are different: each country decides whether interests in movable property are recorded against the object, against the debtor, or not publicly at all. A search plan is therefore built country by country, starting with where the asset is registered and where the seller is located.

The United Kingdom shows the variety inside one country. The Civil Aviation Authority publishes mortgage information for aircraft on the United Kingdom register, searchable with the aircraft type and serial number, and allows a priority notice to be entered on its register of aircraft mortgages. For cars, Citizens Advice recommends a private history check before buying a used vehicle, which it says costs up to £20 and can show whether the seller still owes money on the car. Neither system resembles the debtor-name filing index used in the United States for art and other goods.

For ships and yachts, the registry of the flag state is the starting point, and the document to request is that registry's own transcript or extract showing registered mortgages. Maritime liens for unpaid supplies, repairs or wages may exist under the law of the place where the vessel was served, whatever the flag.

For aircraft, the International Registry applies only between countries that are party to the Cape Town Convention, so a search certificate is meaningful for an aircraft with a history in a contracting state and silent on anything that happened elsewhere. For art, watches and jewellery, some countries keep a public register of security interests in movable property and others keep none, and the rules on whether a good-faith buyer can acquire ownership of a stolen object differ sharply between legal systems. On a cross-border purchase, the contract names the governing law, the searches are ordered by a professional in each country concerned, and the payment terms described above carry more of the weight, because they work the same way everywhere: the creditor is paid out of the price, and the seller receives what is left.