The Personal Property Securities Act 2009 (Cth) (“PPSA”) is a piece of commonwealth legislation which came into effect in 2012. The PPSA has reformed lending that is secured by any collateral other than land or interests in land, changing the way in which business take security over collateral.
The PPSA achieved two central goals; (i) it developed a set of rules relating to the enforcement and priority of security interests as they relate to personal property; and (ii) it created a national online register. This register allows a wide range of security interests relating to personal property to be recorded. Users can also undertake searches of debtors and collateral.
It is obviously common practice for a creditor to take a security interest over a debtor’s collateral. This allows the creditor to enforce its rights against particular items of collateral in case the debtor defaults on the obligation. In the event that a debtor is declared bankrupt, or goes into insolvency, the secured creditor will take precedence over any unsecured creditors when the property of the debtor is being distributed. The above process still needs to be undertaken by creditors, but the PPSA rules have added another layer of complexity to the process; they give priority to a secured creditor who has registered (perfected) his or her security interest, over a creditor who has not taken such a step.
How does one register a security interest?
As the PPSA legislation has set up an online registration process, registering is a relatively simple and painless process. There are however certain provisions in the PPSA legislation which ensure that different businesses dealing with personal property securities may be affected differently.
Examples of PPSA changes
- Used Car Dealers and Pawnbrokers
The PPSA changes will not affect all businesses equally. Used car dealers and pawnbrokers are exempted from certain sections of the PPSA legislation, for instance the reforms do not apply where a pawnbroker takes a security interest over personal property to secure a loan of $5000 or less and the market value of the personal property does not exceed $5000.
- Statutory Fishing Rights
The Australian Fisheries Management Authority no longer registers the third party interests of the holders of Statutory Fishing Rights. Under the PPSA reforms, a third party security interest in a Statutory Fishing Rights will be known as a security interest in personal property.
- Retention of Title
Retention of title clauses have been significantly overhauled by the PPSA legislation. Sometimes property is sold or leased on the basis that the purchaser takes the property but legal ownership, or title to the property, remains with the seller until the financial arrangement is concluded. Terms of supply agreements and leases may need to be reviewed by business owners or their business advisors to determine whether they are in accord with the PPSA to ensure that priority is maintained.
- Motor Vehicles
The Personal Property Securities (PPS) Register is a new national register for recording security interests (e.g. encumbrances) in personal property including vehicles. The new PPS Register is scheduled to commence in early 2012. The PPS Register will replace all state and territory registers of security interests in personal property, including registers of interests in motor vehicles, such as the REVS in NSW or the VSR in Victoria. This means the PPS Register will be the register on which security interests in vehicles are recorded. The PPS Register should be searched to find out about existing interests in a vehicle as part of the checks that you undertake to ensure that you can provide clear title to a vehicle.
The PPSA legislation has dramatically changed the way in which security interests can be registered and dealt with. LegalVision has developed a thorough and cost effective PPSA review and evaluation product to ensure your needs and interests that are effected by the PPSA can be identified and protected. Contact us today on 1300 544 755 to get high quality legal advice at a fixed-fee.