A long-awaited Act has been passed to amend the Personal Property Securities Act 2009 (Cth) (“PPSA”) in respect of serial numbered goods, like motor vehicles, watercrafts and aircrafts.
Under the PPSA, these goods are currently deemed to be security interests (and so require registration to protect them) if they are leased/ hired for a term of 90 days or more. The amending Act deletes this deeming provision. This means that, once the amendment is in, the lease of serial numbered goods will be treated just like the lease of other types of goods – where registration is required if the lease is for over 12 months or for an indefinite period.
This single threshold will simplify the PPSA. Importantly, it will reduce the compliance costs for small and medium equipment hire businesses. Soon, any lease of goods (including motor vehicles, watercrafts and aircrafts) will not require registration if it is for a fixed term of 12 months or less. In this regard, we are talking about standard hires (not, for example, finance leases – which still require registration as “in substance” security interests securing payment or performance of an obligation).
This change will take effect on 25 December, 2015 or on an earlier date if fixed by proclamation. We are still waiting to hear if the Government is going to bring the change in sooner by proclamation.
It is important to note that the change will not be retrospective. Leases of serial numbered goods for a term of 90 days or more which are entered into before the amendment commencement date must still be properly registered in order to achieve the protection under the PPSA. So, hirers must still be registering their interests as normal for the time being.
In the meantime, hirers should review their internal procedures to ensure that they are getting written and signed agreements in place and correctly registering the leases that need to be registered. We (and the courts) have seen a number of companies go under with numerous pieces of equipment in their yard that they have been hiring from other people, and those hirers that have not registered their interest losing their equipment when the liquidator or administrator steps in. The consequences of not registering (which generally costs under $20) is devastating for these hirers.
When the change comes in, hirers should update their procedures (and hire agreements, if necessary) so that they can take advantage of the cost and time savings which this amending Act brings.
Finally, we also note that a statutory review of the PPSA has been undertaken and further changes may follow. Watch this space.