PPSA & PPSR: take swift specialist legal advice today

Personal Property Securities Act 2009 (PPSA)

By: Andrew Lind, Partner & Kathleen Watt  (updated 9 May 2012)

The Commonwealth PPSA effectively commenced on 30 January 2012 with the commencement date of the Personal Property Securities Register (the PPSR).

The PPSA and PPSR are quite simply – game changers.

Under the PPSA, “title is no longer king” but “priority of perfected security interest is king” or to put it another way, “perfection is more important than ownership”.

The outcome of failing to have a registered security interest when you need to have one is quite simply, draconian. Your personal property is liable to be “sold up” by the financier of your client or customer.

The risk arises where a party with your personal property grants a security interest in that property to their financier.  In a dispute, priority to the property will generally be given to the party with a security interest that is perfected first in time.  Registration is one way to ‘perfect’ your security interest.

My rule of thumb is – if your personal property is with anyone else, you need to consider registering a security interest or risk losing your personal property.

Registering your security interest

When you register a security interest over your personal property, you are the secured party, your property is collateral and the party with your collateral is the grantor.  A secured party must create a Secured Party Group (“SPG”) on the PPSR before they can make any PPSR registrations.

Registration on the PPSR involves completing a financing statement online.  Extreme care needs to be taken in completing a financing statement, particularly in relation to how your collateral is described, because a defect in the registration can jeopardise your security interest.  A security interest (subject to some limitations for consumer property) may be registered for 25 years, between 7 and 25 years, or have no stated end time.  PPSR registration fees will depend on the type and duration of your security interest.

What property is covered by the PPSA?

The PPSA, as the name suggests, governs security interests in personal property. Land and fixtures to land (e.g. buildings) are excluded. But just about every other kind of property can be collateral, such as:

• Tangible property such as:
• motor vehicles
• aircraft
• boats
• equipment
• chattels and furniture
• jewellery
• Intangible property such as:
• Intellectual property
• Licences

Terms & Practice of Supply need review

Terms & Conditions of trade need to be reviewed and swift advice taken, especially in relation to new accounts. “Retention of Title” clauses will no longer be enough. Remember – “Title is no longer king”.

Buying & selling businesses

There are some significant pre-contractual due diligence matters that will need to be considered and covered off, in special conditions (and annexures) of the Contract of Sale, by both Sellers and Buyers. Additionally, there will be need for some significant additional searching of the Personal Property Securities Register for buyers.

Vendor Finance arrangements, which are not uncommon in the current climate, will need some extra attention as well.

Hire, Licensing & Leasing

If you hire, license or lease any property that is not “land and fixtures”, a security interest should generally be registered. Failure to do so may enable a financier of your customer to sell up your property and keep the proceeds.

Intellectual Property

While Intellectual Property Licences get some carve out treatment in the Act, these provisions need to be carefully navigated and a change in licence terms is usually needed to protect IP owners.

Transition period – yes but no

There is a transition period for the registration of existing security interests for for a period of 24 months commencing from 30 January 2012. However this does NOT apply to new security interests created from 30 January 2012.

Need PPSA legal advice?

Contact our office, wherever you are in Australia, for a fixed fee High Point advice conference with one of our team of lawyers committed to assisting clients in understanding and responding practically to these PPSA changes.

About the specialist lawyers at Corney & Lind

The Corney & Lind law firm has sufficient depth in our team of solicitors to provide specialist legal advice but remains small enough to be personal and highly responsive to the needs and time demands of our clients.