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What do I need to know about the Personal Property Securities Act?

The PPSA works as a comprehensive code and framework governing securities taken over personal property, with a few exceptions.

For many years, Australian laws relating to Personal Property Securities (“PPS”) have been messy due to incomplete state records.

The national PPS Register overcomes this issue because it enables businesses and business advisors to search and register personal property securities online in an efficient and cost effective way.

3 stage PPSA process ensures good lending practices

The taking of good security requires lenders to follow a 3-stage PPSA process to ensure that their security interests:-

  • are attached to the secured property - this makes the security interest enforceable against the borrower;
  • are enforceable against third parties - usually through a written loan agreement;
  • are perfected.  For most security interests, perfection will be effected by registration on the PPS Register.  Perfected interests will survive the borrower’s insolvency and gain priority ahead of other later registered or unregistered interests.

What are the benefits of the PPS Register?

The PPS Register (“PPSR”) is an electronic 24/7 register operated by the Insolvency and Trustee Service of Australia (ITSA).  It is a paperless system.

The Register provides a simple and inexpensive way for a potential lender to find details of the borrower’s personal property already used as security for supply arrangements or loans.

Having this information will assist a potential lender in deciding whether to advance credit, provide or lease goods on credit in exchange for security in tangible and/or intangible personal property.

For example, imagine your brother in law wants to borrow $10000 to renovate his kitchen and offers his ute as security. You would be able to check the PPSR and find out if it is valid security.

Another beneficial use would be a business owner who is a potential buyer of personal property, for example, a vehicle or business equipment.  By using the PPSR, the potential buyer can check whether the property is clear of any security interest before making the purchase so that if they make the purchase, the property cannot be later claimed by another party who has a security interest in it.

What exactly is “personal property” for the purposes of the Act?

Personal property is any kind of property other than land, fixtures, water rights or a right granted by a Commonwealth, State or Territory law which is expressly excluded from the PPSA.

Personal property can include

  • tangible items – things you can touch - such as cars, boats, machinery and crops;
  • intangible items – things that are merely ideas or concepts - such as shares, intellectual property (patents and trademarks) and contractual rights eg taxi oprating licenses.

Do I need to register my Agreement under the Personal Property Securities Act?

Yes.

A lender that fails to register its security interest on the Personal Property Securities Register (“PPSR”) will usually lose the benefit of its security interest to a buyer of the secured property or to another lender who registers their interest ahead of them.

Taking the previous example of the brother in law - if you didn't register your interest in his ute as security for the $10000 loan, then someone else - eg someone who buys his ute or if he offers it as security to another lender who registers the interest before you do, would have the rights to the ute instead of you.

In the PPSA world, priority of competing security interests is determined by the legislation.  It will not matter what sort of competing security interests there are. For example, a person with a registered PPSA interest in property that someone else physically possesses can, in the event of default by the person who possesses the property, gain possession of the property ahead of all others to satisfy his claim.  However, if that interest is not registered, and a second person’s is, the second person can take the goods even if the first person hasn’t been paid for them, or was only leasing them.

How do I register my Agreement?
We recommend you take steps to have your Personal Property Secured Loan Agreement registered immediately.  It does not need to be finalised in order for it to be registered.

For information on how to register or to lodge a Financing Statement, log in to the PPSR portal at:-

https://transact.ppsr.gov.au/ppsr/Home

 

 

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