The Personal Property Securities Amendment (Deregulatory Measures) Act 2015 (Act) became an Act on 25 June, 2015 assented to by the Governor-General.
The Government has now proclaimed that this Act will commence on 1 October 2015. This means that on and from 1 October 2015:
- there will no longer be a lower 90 day threshold for the existence of a ‘PPS lease’ security interest. The 90 day threshold previously applied to ‘serial number registrable’ goods including motor vehicles (as defined in PPSA), aircraft and their engines and watercraft; and
- a uniform threshold of one year will apply to all kinds of hires of goods, whether or not the goods are of the serial number registrable kind.
The abolition of the lower 90 day time threshold for some goods removes some of the onerous effects of PPSA for hire and other businesses who enter into transactions that could be caught by the ‘PPS lease’ concept. Whilst the amendment is welcome for businesses who lease or hire out or enter into bailment arrangements in respect of serial number registrable kinds of goods, it is important to note:
- an ‘indefinite’ hire or bailment can still be a PPS lease from inception. So the PPSA can still catch very short term hires or bailments of even few days or hours if they don’t have a contractually agreed end date of less than one year. It is likely that the ‘indefinite term’ concept will be taken out of the PPSA in due course but that reform is some time away and has yet to be formally proposed by Government.
- hires, leases and bailments of more than a year will still be caught by PPSA as ‘PPS leases’ and we note that option periods are counted in determining whether the threshold is crossed.
- any hire or lease that functions ‘in substance’ as a security interest will also still be caught by PPSA from inception - for example rent to buy or hire purchase arrangements. No time threshold applies to these.
- the abolition of the 90 day threshold will only apply to transactions entered into after 1 October 2015.
- whilst the Act will reduce the number of hires, leases and bailments that give rise to ‘PPS lease’ security interests, it does not abolish the concept of serial number registration. So where there is a PPS lease or other security interest in respect of serial number registrable goods it is important to consider whether to make a serial number registration to gain the benefits of specific registration. Those benefits are mainly around protection against loss of ownership through a wrongful sale by a customer.