PPSA Changes as to when you must register your hire arrangements. Failing to do so may result in you losing your assets if the hirer goes broke…
Personal Property Securities Amendment (PPS Leases) Act 2017 (“Amendment”) which amends the Personal Property Securities Act (“PPSA”) was assented to today so the following changes will be in effect from tomorrow. What does this mean?
Since the PPSA came into effect on 30 January 2012, ownership was no longer king and under some hire and bailment arrangements, if the hirer went into
liquidation then the assets hired out would vest in the liquidator of the hirer; which meant the owner would lose their asset.
Not all leases and bailment arrangements were captured under the PPSA. In order for it to apply, the hire or bailment arrangement had to be deemed
a security interest by satisfying the definition of a “PPS Lease” under Section 13 of the PPSA. A hire or bailment arrangement before the 20th
May, 2017 provided that was for a term greater than one year (including any option terms) or for an indefinite period (no end date) would be deemed
a PPS Lease under the PPSA and thus a security interest requiring perfection and registration under the PPSA.
The Amendment effective from 20th May, 2017 changes the definition of “PPS Lease” so it no longer relates to a lease or bailment of goods entered into
after 20th May, 2017 where the lease term (and its options):
(i) are not longer than 2 years;
(ii) are not longer than 2 years and the lease has not run over the 2 year period; or
(iii) is for an indefinite provided it does not run for a period greater than 2 years.
If you are the owner of the goods and you are going to, or believe on reasonable grounds that you are going to, exceed the 2 year period under items
(ii) and (iii) then you can and should register your security interest over the hirer in relation to the goods before expiry of the 2 year period.
Failing to do so would mean after the 2 year period that you may be placing your assets at risk if the hirer has other security registered over
its assets or an administrator, trustee in bankruptcy or liquidator is appointed over the hirer.
What about your hire arrangements before the 20th May, 2017? They will still be governed by the pre-amendment provisions under the PPSA.
The key to protecting any assets you hire or provide to another for a fee is to make sure you have it documented and signed by the hirer and registered
correctly within the timeframes and classes provided under the PPSA.