HOW SOLID IS YOUR PPSR SECURITY REALLY?
Personal Properties Securities Register
The Personal Properties Securities Register (PPSR) is an online national register where individuals and businesses can register security interests over personal property. This regime was introduced in 2012 replacing the existing Commonwealth, State and Territory regimes.
The PPSR can be searched to identify whether any person or company has an interest in a specific good or asset. Accordingly, a PPSR search will enable you to ensure that any property you are buying is free of registered interests. We actively recommend these searches to our clients who are in the business of hiring, leasing or selling goods to ensure that their interest is protected in the event the hirer, leaser or buyer defaults on their obligations.
The legislative regime
Interest in collateral can be recognised by registering a financing statement, subject to certain requirements:
- The security interest must be attached to the collateral and enforceable against a third party. In order to comply with the latter requirement, a written security agreement is usually required with a description of the collateral; and
- The security interest must also be perfected, which can be complied with by registering the security interest on the PPSR. The result of this is that the interest in the property is officially recognised.
What happens when things go wrong?
Despite its detailed requirements, financing statements continue to be frequently registered incorrectly. Most recently in the matter of OneSteel Manufacturing Pty Limited (administrators appointed)  NSWSC 21, OneSteel Manufacturing Pty Ltd, leased plant and spare parts over which Alleasing Pty Ltd had registered a security interest. Unfortunately, the registration was registered using the OneSteel’s Australian Business Number (ABN) and not the company’s Australian Consumer Number (ACN), as is required. This critical mistake lead to a $23 million loss sustained by Alleasing, as the property was deemed to be unsecured.
Taking free rules and other exceptions
The legislation also provides circumstances where, despite an effective registration, collateral may be taken free of a security interest. This typically occurs where property is sold in the ordinary course of business where the relevant property is personal, domestic or household property, or in the event a registration requires a serial number and that serial number is absent or incorrect.
The expiry of security interests on the PPSR
Registrations on the PPSR for property with a serial number, such as motor vehicles and boats, have a maximum registration period of seven years. Therefore, any individuals or businesses which registered a security interest upon the commencement of the Personal Property Securities Act 2009 (Cth) in January 2012 for a period of seven years, may now be unsecured creditors if they did not renew their security interest prior to 30 January 2019.
The expiry of a security interest on the PPSR may mean that the previously registered party could now rank behind other secured creditors and may have lost priority amongst other secured interests in the personal property.
To ensure a PPSR registration does not lapse, it is essential that a security registration is renewed before its expiry date.
Can we help?
In consideration of the above, it is imperative that secured parties take the appropriate measures to correctly register their security interest. Whilst it is common for businesses to sell or lease their property with a Retention of Title clause, this alone is not sufficient to protect an asset and additional measures ought to be taken.
DSS Law has a team of specialised lawyers who regularly deal with PPSR registrations. If you have any questions about this article or wish to obtain an advice on how to best protect your assets, please do not hesitate to contact our office on (07) 3210 2373.
DSS Law insight articles are intended to provide commentary and general information. They should not be relied upon as formal legal advice. If you would like specific advice relating to this topic, please contact DSS Law on 1300 DSS LAW or firstname.lastname@example.org.