Did you know that most leases of goods as part of a lease of residential premises are excluded from the PPSA even if the lease is for a term of more than one year?
We have seen some legal commentators state that the PPSA applies when a landlord leases residential premises to a tenant which includes household furnishings and appliances. However, while the PPSA applies to a lease or bailment of goods for a term of more than one year or for an indefinite term, it will not usually apply to a lease of household furnishings and appliances as part of the lease of residential premises.
Section 13(2)(c) clarifies that the PPSA does not apply to a lease of goods that is consumer property leased as part of a lease of land where the use of the property is incidental to the use and enjoyment of land. Since the use of furniture and appliances by residential tenants is incidental to the use and enjoyment of the premises, the PPSA will not apply unless the furniture and appliances are not classed as consumer property.
Consumer property is defined to mean personal property held by an individual, other than personal property held in the course or furtherance, to any degree, of carrying on an enterprise to which an ABN has been allocated. In most cases, individual tenants who lease household furnishings and appliances as part of a lease of residential premises would not be using those furnishings and appliances in carrying on a business enterprise. Therefore, as long as the tenant is an individual, the exclusion is likely to apply. If, however, a residential premise is leased to a body corporate, then the PPSA will apply to the extent that goods are leased as part of the lease of the premises and the lease is for a term of more than one year.