Why are so many PPSR registrations occurring after the security agreement is signed?
Many secured parties are still registering at the closing of a transaction despite the fact that the PPSA is designed to accommodate early registration. Section 161 confirms that a registration can be made in the PPSR before or after the security agreement is made or attaches to the property. A secured party is able to register even before the terms of the security agreement have been concluded as long as the registrant is mindful of section 151 and believes on reasonable grounds that the security interest eventually will be created.
If the reasonable grounds disappear, no harm done. Section 151 provides further that the registrant must remove the registration within 5 business days of the day when there stopped being reasonable grounds for the belief that the security interest would be created.
A registrant is well-advised to take advantage of this feature of the PPSA and register as soon as the reasonable belief arises. The “priority time” for a security interest often hinges on the date of registration. Therefore, the earlier a registration is made, the more favourable is the secured party’s priority position. Furthermore, the early registration enables the secured party to perform due diligence and conclude the deal without having to worry that an intervening security interest becomes registered and takes priority.