By now you will know of the Personal Property Securities Act 2009 (PPSA) and the Personal Properties Security Register (PPSR) which covers the law/register governing security interests in personal property. “Personal property” is all property other than land, fixtures and some statutory interests.
A “security interest” is an interest in personal property which secures payment of a debt or fulfillment of another obligation. These used to be referred to as “charges” or “debentures”. It also covers transactions which were not traditionally considered as security interests, in particular Retention of Title (ROT) clauses. This is where a party has possession of a property although, does not acquire the title from the other party until the full purchase price for the property is paid or a certain obligation is satisfied.
Under the PPSA, ROT suppliers will become secured parties with a security interest in the collateral, known as a purchase money security interests (PMSIs). A PMSI must be registered within a strict time frame to ensure it gains its “super priority status” elevating the interest of the secured party to a higher status relative to other interests where the specific requirements of the PPSR have been complied with.
A PMSI must be registered before supply to the purchaser in the case of inventory and for non-inventory it must be registered within 15 days from the commencement of a security agreement.
Another benefit of a registered security interest for ROT is the protection offered against a liquidator or trustee in bankruptcy. Prior to the PPSA, ROT clauses often were deemed ineffective when disputed by a liquidator due to the construction of the clause. Under the PPSA, a registered security in the property provided or leased means it will not be available to a liquidator or a trustee in bankruptcy.
There are further elements which must be considered when registering a PMSI. We recommend suppliers put in place procedures to ensure a security interest is properly created and registered. Please contact Janelle Boutros if you wish to discuss this further.