The Personal Property Securities Register (PPSR) is the national regime for recoding security interests in personal property. Ryan Gray, Associate, explains how the PPSR can be used to protect your interest in personal property and what recent legislative changes mean for your business.
WHAT IS THE PERSONAL PROPERTY SECURITIES ACT (PPS LAW)?
In a nutshell, the PPS Law established the Personal Property Securities Register (PPSR), the national register to record 'security interests' in 'personal property' (being any property other than land or fixtures to land). The PPS Law introduced a 'first in time' registration approach to priority in circumstances where more than one person has a 'security interest' in the same 'personal property' - generally speaking, those who register first get priority.
A 'security interest' in substance, secures payment or performance of an obligation. For example an interest in:
- a motor vehicle as collateral on a debt owed to the financier of the motor vehicle; or
- goods sold on credit or consignment arrangements.
The PPS Law extends this broad definition to include a number of 'deemed' arrangements, including certain leases of personal property.
WHAT ARE THE CHANGES TO THE PPS LAW?
On 1 October 2015, the Personal Property Securities Amendment (Deregulatory Measures) Act (Deregulatory Act) came into force. The Deregulatory Act, amends the PPS Law so that hires (or bailments) of serial numbered equipment (such as machinery and vehicles) for less than 12 months will generally not be considered a security interest under the PPS Law. Previously the threshold for these goods was 90 days. Leases of less than 12 months will now only give rise to a security interest if they 'in substance' secure payment or performance of an obligation.
WHAT DO I NEED TO DO?
In most circumstances, if your company leases serial numbered equipment to others for periods of less than 12 months, the arrangement will not need to be registered on the PPSR. However, some hire arrangements, including equipment finance leases, will constitute an 'in substance' security interest, irrespective of the term of the arrangement. These interests should be registered on the PPSR to adequately protect the interests of the owner, despite the changes introduced by the Deregulatory Act.
As was the case before the Deregulatory Act took effect, a lease of equipment for an indefinite or unspecified term requires registration on the PPSR to ensure maximum protection of the owner's interest in the equipment.
Broadly, to adapt to the Deregulatory Act changes, companies should now review (and if needed update) their:
- conditions of hiring (in particular to ensure that the term of the hiring is specified); and
- PPS policies and practices, to ensure that they are not making unnecessary registrations.