Personal Property Securities Register – Are You Ready?

In October 2011, the Commonwealth Government will introduce the new Personal Property Securities Register (PPSR) as part of the Personal Property Securities Act 2010.  At the present time, the States and Commonwealth all have separate registers and legislation dealing with personal property interests.  Examples of these include the Register of Encumbered Vehicles (REVS) in Queensland and the ASIC register of company charges.  Come October, all of these registers around Australia will be combined into one central register to be administered by the Insolvency and Trustee Service Australia (ITSA).

The new laws will govern how personal property may be used as security for a loan.  Personal property is any form of property other than land, buildings or fixtures which form part of the land.  Examples of personal property include vehicles, machinery, crops and intangible property such as intellectual property and contractual rights.

There are a number of ways the new laws and register will affect individuals and businesses.  The biggest change will be in the area of retention of title of goods which are sold, but not yet paid for eg goods sold on credit, or on trading terms.  Many businesses that sell or install goods have retention of title clauses in their contracts/terms of sale.  This allows the seller/installer to retain title to the property they have sold until the customer makes full payment for the item – even though the item may not be in the seller’s possession.  An example of this may be a manufacturer of doors.  Let’s say the manufacturer sells 100 doors to a local door retailer.  A successful retention of title clause would allow the manufacturer to retain ownership of the doors until the customer (door retailer) has paid for them.

The benefit of these clauses is if the company in possession of the goods goes into liquidation, good retention of title clauses will not allow the liquidator to sell the goods that were not paid for and they would be returned to the seller.  In our door example, if the retailer goes into liquidation, the manufacturer could make a retention of title claim against the liquidator and could have any doors returned which have not been paid for by the retailer.  With the introduction of the PPSR, retention of title clauses will need to be registered if they are to be effective against any liquidator.  It is very important for any business that has a retention of title clause to take note of the new laws and register.  These clauses are wide spread across all facets of business – from local electricians through to large scale mining machinery manufacturers.  Any retention of title claim that is not on the PPSR after October 2011 may be rendered worthless if another party does register an interest in the same property.  As a business owner, it is important to check your terms of trade and get in touch with us if you have a retention of title clause so that we can properly advise you how to deal with the changes.

Another way the new laws will affect business operators is the availability of the register for searching property which may be on the register.  This is relevant when acquiring assets likely to be encumbered, such as machinery or vehicles.  Any registered security interests in such goods will appear on the register so that prospective purchasers will be put on notice of a financier’s interest in the property.  Caution must be taken when any registered interests are found as a result of searches of the PPSR.  Once the PPSR is established in October 2011, we will be able to assist you to conduct searches on personal property and to advise you on the outcomes of results.

Some other areas of business will also be affected by the legislation.  These include the ability to register an interest in intangible interests such as certain contractual rights and hire purchase agreements.  It is also relevant to note that the legislation does offer exemptions to some situations where property interests do not have to be registered.  An example of this is a tradesperson’s lien.  An example of a tradesperson’s lien is where you take your car to a mechanic to get it fixed.  At common law, the mechanic is entitled to retain possession of your car until you have paid for the repairs.  These types of security interests will not require registration on the PPSR.

From a consumer perspective, the register will be the new point of enquiry if you wish to check on vehicles or other property you are purchasing which may be encumbered.  If a company or individual has a security interest in the property, it should be noted on the PPSR.  This will then alert the consumer to the fact that the property is being used as collateral to secure some form of loan or other type of interest.

General information about the PPSR can be found on the Commonwealth Government’s website at:  If you require assistance to ready your business for the upcoming changes, or if you need help to understand the way in which the new laws may affect your operations, make an appointment to see one of our commercial lawyers.

For more information or to request an appointment, please get in touch with us today.
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