The definition of a PPSA lease is changing effective 1 October 2015.
As readers would be aware, under the old rule, leases of serial numbered goods for a term of 90 days or more were deemed to be security interests and therefore required registration on the Personal Property Securities Registry.
Under the new rule, leases for less than 12 months will only give rise to a security interest and require registration if they "in substance" secure payment or performance of obligations.
The change means that there is no longer any distinction between serial numbered goods (such as motor vehicles, aircraft, boats, cranes and excavators) and other types of goods.
The change is not retrospective. Security interests for leases of serial numbered goods for a term of more than 90 days entered into before 1 October 2015 should still be registered.
The reforms however have stopped short of addressing when a lease will be considered to be for an indefinite term. Indefinite term leases will still require registration otherwise owners (and arguably their financiers) risk losing title should an insolvency event occur. For an example where an owner has lost title to serial numbered goods for failing to register, see the decision of the Supreme Court of NSW in Albarran (as recs and mgrs of Maiden Civil (P&E) Pty Ltd) v Queensland Excavation Services Pty Ltd.
An indefinite term lease will typically arise where a short term lease (say 30 days) has been rolled over for 12 months or more. In this situation a failure to register means that the lessor will lose title to the goods should a PPS registration not be made and an insolvency event occurs to the lessee.
Because indefinite term leases continue to cause uncertainty and potentially result in windfall gains for unsecured creditors, we believe it should be given priority for PPS reform.