The Personal Property Securities Act (PPSA) is one of the most significant pieces of legislation affecting the property of Australian individuals and businesses, and, as The Age has recently reported, we are once again witnessing the catastrophic consequences of non-compliance.
What is the PPSA?
The PPSA was introduced in 2012, creating a uniform Australian scheme for registering security interests in personal property. Under the Act, businesses and individuals with certain security interests are required to register those interests on the Personal Property Securities Register (PPSR) correctly and on time.
When should I register?
You will have a registrable security interest if you use personal property to secure payment or performance of an obligation, and in relation to certain leases or bailments of personal property. For example, a security interest will arise if:
- You supply goods to a customer on a "retention of title" basis - that is, you retain title to the goods until they are paid in full;
- You lease, hire or bail personal property on a long term basis;
- You deliver goods to a seller on consignment;
- You supply goods under a finance lease or hire purchase agreement;
- You have a charge or mortgage over shares or units in a unit trust or other personal property;
- You enter into a long term contract (such as a construction contract or supply contract) which contains security interests to ensure the other party's performance of contractual obligations (such as take over rights).
What if I fail to register?
This can have costly consequences. Failure to correctly register your security interests can result in:
- A loss of priority over your property where other parties have correctly registered their interest in that property;
- A third party, such as a purchaser, taking the property free of the security interest;
- Not having any legal claim to your property whatsoever if it is in the possession of a company that becomes insolvent.
The dire consequences of failing to register have happened all too often in the PPSA's short history
Just six months ago a failure to register a security interest on the PPSR resulted in a company losing over $1 million worth of their own property.
A case currently before the courts could see US company APR Energy lose an astounding $50 million worth of assets that were unregistered and leased to the Forge Group, which subsequently became insolvent (read more here).
It is not adequate to simply have legal title over property
If another party has possession of your personal property, the fact that you are the legal owner of the property may be irrelevant if you have failed to correctly register your security interest on the PPSR. The only way to protect your interest is to register it.
Compliance with the PPSA is strict, and registration of security interests must be done correctly. The cost of registration starts at around $16 (plus legal fees) and is a fairly small price to pay in comparison to the substantial risks of failing to register.
If you are concerned about how the PPSA may affect you, or if you need advice about whether you have any security interest that require registration, Tucker Partners can assist you.
For more information contact our team on 03 9691 5959.
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