The Personal Property Securities Act (or PPSA as it’s known) has been around since 2009. It has been updated several times since enactment and decisions on certain legal cases have referenced the PPSA, so we thought it was about time we gave you an update on this important legislation.
Why was the PPSA enacted?
The PPSA commenced on 15 December 2009, and established the Personal Property Securities Register (“PPSR”), a centralised database operated by the Australian Government. This system aims to enhance transparency, reduce transaction expenses, and simplify credit access by regulating the establishment, priority, and enforcement of interests in personal property.
Why register a security interest?
Businesses benefit from registering their financial interests on the PPSR. Failure to do so may result in non-payment for goods sold or lower priority in the event of insolvency. Conversely, potential buyers can verify whether any security interests exist in property they want to buy by consulting the PPSR for existing ownership claims. PPSR registrations offer legal recourse, priority, and transparency in personal property transactions, ensuring the protection of investments for both businesses and individuals.
For instance, if a lender lends money and takes equipment as collateral (and properly registered their interest in the equipment on the PPSR), and the borrower fails to pay back the loan, the lender can rely on their claim on the PPSR. If the borrower tries to sell the equipment, a potential buyer can see the lender’s interest on the PPSR. This way, the buyer knows the equipment is encumbered by the lender’s claim and might decide not to buy it to avoid a dispute. This process highlights the importance of PPSR registration for protecting assets and facilitating secure transactions for sellers, buyers, and lenders.
What is personal property?
Personal property is typically all property other than real estate. While it can include intangible property like contractual rights and negotiable instruments, the PPSR typically deals with tangible assets like cars, machinery, and other high-value assets. It also can protect interests in usable goods, known as fungibles, like building materials or raw ingredients.
What security interests can be registered on the PPSR?
The types of security interests that can be protected include:
- an agreement to sell goods subject to a retention of title;
- a hire purchase agreement;
- consignments; and
- the lease of goods.
How to register and search
Registering a security interest on the PPSR is a straightforward process, involving an online form and payment of a fee. Registration must typically occur within 20 business days of any security agreement, which should ensure priority over other claims. Benefits include establishing a perfected interest and priority over unregistered claims, crucial for protecting the secured party’s position in insolvency scenarios.
Searching the PPSR is equally accessible. Users can conduct a $2 search online using relevant criteria like names or serial numbers. This process enables potential buyers to verify if any existing security interests encumber the property. By facilitating quick and affordable searches, the PPSR promotes secure transactions and mitigates risks associated with acquiring encumbered assets.
Who should use the PPSR?
Any business that deals in personal property should consider how the PPSR can assist them. A prudent seller of personal property might register an interest in property when the property is provided to the buyer before the seller receives payment. A purchaser of goods should conduct a PPSR search prior to purchase to ensure there are no unexpected securities on the property they want to buy. Credit providers who lend money to borrowers using personal property as security for a loan should also register their interest in that property. In the event the borrower defaults on the loan, PPSR registration will assist the credit provider to recover loaned monies from sale of personal property.
Don’t get caught unregistered!
To navigate the complexities of the PPSR and make certain that your assets are protected, connect with our team, who can guide you through the process.
