The provisions for registration of personal property Securities Act 2009 (the Act) came into force in Australia on January 30, 2012. The Act brings existing laws of the Commonwealth, State and territory and records regarding security interests in personal property together in one national system. Replaces approximately 70 Commonwealth, State and territory acts.
The law establishes a register (PPSR), which will replace over 40 records, including ASIC fees and register (register of encumbered vehicles).
Brief summary of the reform
This is probably the most significant financial law reform since the introduction of consumer credit legislation in the 1980s and the introduction of GST. The law provides rules for the creation, termination and enforcement of security interests in personal property and for the determination of priority between competing security interests.
One of the key changes is the new reform PPSR allowing banks and businesses to register a security interest in personal property. Secured parties, buyers and other interested parties can search PPSR to find out if a recording was made in relation to the particular property.
The Act is relevant where an insured party takes a personal interest in property as collateral for a loan or other obligation, or enters into a transaction which involves the provision of guaranteed funding.
Under the law, personal property is defined as any form of property, other than land and buildings and appliances that are part of the Earth. Includes tangible personal property such as cars, art, machinery and crops, as well as intangible assets such as intellectual property and contract rights.
Priority of interest
Priority rules are relevant when the personal property is subject to two or more security interests. If the debtor defaults, the rules determine the order of priority-in practical terms, that is paid and who is not.
Perfection is a step required to be taken in relation to a security interest to ensure priority against other parties that may have an interest in the same collateral. A secured party may perfect their security interests and obtain priority over security through registering their interest, or (in some cases) that you own or control the warranty.
Retention of title
Vendors who sell goods subject to retention of title are no longer able to rely on their way to protect their interest for these goods. They should register their interest on PPSR. Failure to do so may cause the manufacturer loses the right to take possession of the goods, if the debtor defaults. Single registration may cover successive security interests in the property provided in subsequent transactions
If in doubt
-Register your interest above personal property security. Will have the best standing when it comes to disputes where you have a perfected security interest rather than an unperfected.
-Contact a lawyer for advice regarding registration, priority, application and other relevant matters.
Stephen Bourne is an attorney in Australia see the profile and also contributes articles and summary cases on the site of the Ekupu law library. Stephen has qualifications law and Economics and is a fellow Australian and New Zealand Institute of insurance and finance.