If you lease boats or other watercraft, the introduction of the Personal Property Securities Act 2009 (Cth) (PPSA) was no doubt a major concern for you. Overnight, the majority of your leases would have become security interests for the purposes of the PPSA. You would have then registered those security interests on the Personal Property Securities Register (PPSR) to protect you from a lessee or a buyer taking free of your interest.
Watercrafts (i.e. boats and ships) are considered serial numbered property for the purposes of the PPSA, and as such, you would have been required to register your security interests by serial number. This meant that you had to work out how to affect serial numbered registrations on the PPSR.
A significant amendment to the PPSA entered into force on 1 October 2015. This amendment means that for the purposes of the PPSA, leases for less than 12 months will no longer be security interests. You will no longer need to register them on the PPSR unless they are ‘in substance’ security interests that secure the payment or performance of an obligation (for example, finance leases).
If you lease a boat for less than 12 months, you will simply need to rely on proving the boat’s ownership to avoid losing it if the lessee becomes insolvent. You will still need to register on the PPSR leases for 12 months or more and leases that secure the payment or performance of an obligation.
Also, you will need to register boat leases by serial number for the purposes of the PPSA, as boats and other watercraft are serial numbered property. The amendments will not affect leases entered into before 1 October 2015. You must still register these leases in accordance with the old regime.
Purpose of the Amendment
The amendment aims to help lessors comply with the PPSA and reduce the risk and cost for lessors who will, generally, have to make fewer registrations on the PPSR. The reforms also aim to deal with some of the issues currently being faced by lessors including:
- the risks of failing to register a security interest;
- the risks of registering a security interest incorrectly;
- the cost of registering all registrable security interests (including seeking legal assistance if required);
- the administrative burden of making sure all registrations are effected and maintained; and
- a lack of understanding as to whether a lease is a PPS Lease and/or an in substance lease requiring registration or not.
It is critically important to take steps and ensure you understand the pre and post reform provisions of the PPSA, as well as the implications for failing to register your security interests or registering them correctly.
You should confirm that you are correctly registering your boat leases in light of the 1 October 2015 reforms. If you have any questions or require any advice as to what the amendment means for your business, get in touch! We would be happy to step you through what registrations you should be affecting and/or whether your standard terms and conditions require amendments to reflect the new regime. One of LegalVision’s PPSA specialists would be delighted to assist you!