31 January 2019 marks 7 years since the commencement of the Personal Property Securities Act (2001) (PPSA).
This 7 year anniversary has particular significance for certain registrations, being registrations against “consumer property” or collateral described by serial number.
Each registration lodged on the PPSR must select an “end date” at which time the registration will cease.
For most registrations over commercial property the end date can be:
(a) up to 25 years after the registration time; or
(b) “no stated end time”, in which case the registration continues indefinitely.
Unlike general commercial property, however, consumer goods and goods described by serial number are subject instead to a “7 year rule”. The end date for a registration describing consumer property or serial numbered goods must be no later than 7 years either after the registration date or any amended registration date: section 153(1) PPSA.
Consequences of the 7 year anniversary
The consequence of the 7 year rule above is that:
(a) any registrations over consumer property or serial numbered property which were lodged immediately when the PPSA commenced will expire in late January 2019 (unless amended before then); and
(b) Any commercial or other registrations which were lodged for 7 years only (for example, to reduce registration costs) will also expire.
Many registrations lodged when the PPSA commenced will have been removed by now due to the financier’s debt having been repaid. However, given the ability of borrowers to refinance against the same assets and securities, there will still be registrations in place which secure outstanding liabilities and which may expire when the 7 year period above ends.
Commercial lenders and secured parties would be wise to conduct a PPS audit now to identify and correct any registrations which would otherwise expire early next year.