Security and asset classes in New Zealand

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Asset classes used as collateral for security

Real estate

Can security be granted over real estate? If so, what are the most common forms of security granted over real estate and what is the procedure?

Yes. Where real estate is a significant asset, security will almost always be taken using a mortgage. Mortgages are put in place through an online registration system (Landonline). Parcels of land in New Zealand are assigned a title reference. When a mortgage is registered against such a parcel, the mortgage is noted against the title reference in the online register. Various memoranda of mortgages (essentially sets of terms and conditions) lodged in that system can be referred to in the registration, which are then incorporated into, and provide the detailed conditions for, the mortgage.

Machinery and equipment

Can security be granted over machinery and equipment? If so, what are the most common forms of security granted over this kind of property and what is the procedure?

Yes. In New Zealand, security over personal property (essentially all property other than land and ships) is governed by the Personal Property Securities Act 1999. Machinery and equipment are personal property, so are governed by this act.

Security is usually created through a general or specific security agreement (an agreement that expressly creates a security interest in the relevant property under the Personal Property Securities Act). In some cases an instrument such as a finance lease is used, under which the secured party retains ownership of the property. In New Zealand, despite the secured party retaining ownership, for the purposes of security law, the secured party is deemed to have a security interest only.

To improve the priority of the security, the secured party will almost invariably register a financing statement on an online register (the Personal Property Securities Register). The register entry describes the debtor, secured party and collateral.

Receivables

Can security be granted over receivables? If so, what are the most common forms of security granted over this kind of property and what is the procedure?

Yes. Receivables are personal property, so are governed by the Personal Property Securities Act. Security is often created through a general or specific security agreement (an agreement that expressly creates a security interest in the relevant property under the Personal Property Securities Act). However, in many cases the receivables are assigned to the secured party instead. In New Zealand, despite the secured party becoming an owner under the assignment, for the purposes of security law, the secured party is deemed to have a security interest only. To improve the priority of the security, the secured party will almost invariably register a financing statement on the Personal Property Securities Register. The register entry describes the debtor, secured party and collateral.

Financial instruments and cash

Can security be granted over financial instruments? If so, what are the most common forms of security granted over this kind of property and what is the procedure?

Yes. Financial instruments and cash are personal property, so are governed by the Personal Property Securities Act.

Security is usually created through a general or specific security agreement (an agreement that expressly creates a security interest in the relevant property under the Personal Property Securities Act). 

To improve the priority of the security, the secured party will almost invariably register a financing statement on the Personal Property Securities Register. The register entry describes the debtor, secured party and collateral.

In addition, where possible the secured party will obtain possession of the financial instrument, because obtaining possession provides additional priority advantages. A secured party will be deemed to take possession if it takes certain prescribed steps under the Personal Property Securities Act. For example, if there are security certificates in existence for the financial instrument, possession is deemed to be taken if the secured party takes possession of the certificates.

Can security be granted over cash deposits? If so, what are the most common forms of security granted over this kind of property and what is the procedure?

Yes. Cash deposits are personal property, so are governed by the Personal Property Securities Act.

Security is usually created through a general or specific security agreement (an agreement that expressly creates a security interest in the relevant property under the Personal Property Securities Act).

To improve the priority of the security, the secured party will almost invariably register a financing statement on the Personal Property Securities Register. The register entry describes the debtor, secured party and collateral.

In addition, the relevant bank account will often be blocked until the secured party permits withdrawals from it.

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