Personal Property Securities leases: Change is on the way
A change is on the way that will affect which Personal Properties Securities (PPS) leases you may need to register on the Personal Property Securities Register (PPSR).
Under an amendment to the Personal Property Securities Act 2009 (Cth) (PPSA) which will soon come into effect, a PPS lease of serial numbered goods where the term is 90 days or more but less than 1 year, will escape the need for PPSR registration - without potential risk of loss of goods.
The Current Position
If you lease or bail out serial numbered goods (such as cars, boats or planes) where the term of the lease is 90 days or more, or even if less than 90 days, where the term is likely to extend beyond 90 days, then you have a PPS Lease capable of registration. Failing to perfect a PPS Lease (usually through the PPSR) puts you at risk of either losing priority in claiming these goods or, in certain circumstances, losing them completely if the lessee enters insolvency.
If the goods don’t have serial numbers, then to be a PPS Lease, the relevant term of the lease must be more than one year (or likely to extend to more than a year), or an indefinite period. This means that many shorter term leases of serial numbered goods, need to be registered or perfected in some way - potentially a large number of registrations each year for businesses that lease or bail out serial numbered goods, with the added confusion of two different term periods.
Change is in the air
To simplify the process, the Personal Property Securities Amendment (Deregulatory Measures) Act 2015 (DMA) was introduced, receiving royal assent on 25 June 2015. It is expected to start (if no earlier start date is announced) from 25 December 2015.
The DMA will remove the reference to covering a lease or bailment of serial numbered goods of 90 days or more from the definition of a PPS Lease. This means a PPS Lease, from the time the change kicks in, will be a lease of any goods that is for a term of more than one year, an indefinite term, or up to one year but that may extend beyond one year.
What does this mean for the lessor/bailor of goods?
If the lease doesn’t secure payment or performance of an obligation and falls within the amended definition of a PPS Lease, then it won’t be deemed to be a PPSA security interest from the time of the change. In short, this means fewer PPSA registrations for your business. The change will only apply to leases of goods entered into after the amendment begins. If no earlier start date is given, this is a Christmas 2015 change to look forward to.
For any questions about the implications of PPSA and its effect on your business, please do not hesitate to contact:
Rebecca Hegarty, Senior Associate
Phone: 02 9895 9289