The Personal Properties Securities Act 2009 (PPSA) came into effect on 30 January 2012, providing regulation for personal property that is used as security, and clear reporting of security claims by creditors over particular goods and assets.
As a result, the Personal Property Securities Register (PPSR) was established. The PPSR makes it easy for consumers to check if an item they want to purchase (such as a car or boat) already has a security interest attached to it. It also makes it easy for creditors to see whether customers have competing arrangements.
The PPSA made it essential for lessors, financiers and suppliers to register their interest or security in property before or immediately after they lease it, finance it, or sell it under terms.
Under the PPSR, personal property includes:
- Cars, motorcycles, caravans, boats
- Intangible property
- Financial property
It does not include land or buildings.
If you don’t have a PPSR registration, your interest in the property may be invalid or rank behind other claimants. This could result in another creditor being paid in advance of you, from property that you believe you have a first ranking security over.
With the 7th anniversary of the PPSA occurring last month, it is possible that some registrations may have lapsed or will lapse shortly, putting some secured creditors at risk of being unsecured or becoming lower ranking secured creditors.
Anthony Pickrell, manager in the Restructuring and Recovery team at RSM, explains.
“The PPSR essentially works on a first-come-first-served basis,” says Anthony. “If you don’t register your interest in the property, or your registration is incorrect or expired, it may be invalid and you may lose your priority or security.”
“Of the three duration categories to choose from when registering a security on the PPSR, the most common is ‘seven years or less’. This means that anyone who registered on or after 30 January 2012 that hasn’t extended their registration will now need to re-register. And they’ll need to do it quickly.”
Anthony says that failing to extend the registration can have serious consequences if the customer or client that you have registered against becomes bankrupt or enters external administration.
“For example, if on 31 January 2012 you registered a new security interest on the PPSR against a leased asset with a seven-year duration period, and you have not renewed your registration, it is expired. This means that if any other third parties have registered a security interest against the same leased asset, their security registration may take priority over yours. This could mean that you don’t get paid from the sale of what would have otherwise been your secured property.”
“The PPSR is quite complex and often lawyers will argue that the answer is not as simple as a claim being completely invalid if a registration is expired or incorrectly registered. However, the cost to rectify an invalid or expired registration usually far exceeds the nominal fee of an accurate and timely registration”.
Registering is easy, and the cost is very minimal. The tricky part is selecting the right drop down menu items when you are registering and ensuring that the PPSR registration is done correctly and validly.
“One of the first things we do when we are appointed as say Liquidators or Administrators, is review the validity of PPSR claims and determine which creditors have claims to what assets,” says Anthony. “It is very common for multiple creditors to claim an interest in the same asset, and it is also quite common for registrations to be invalid due to incorrect documentation or registration.
“I regularly see small business owners and even large sophisticated financiers adversely affected by invalid PPSR registrations. Your lawyer, accountant or business advisor can help you complete a valid registration, but from there just be sure to keep a reminder of when it is going to expire. That way, you can go in and extend the registration rather than having to re-register.”
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