Personal Property Security Register Reminder
30 January 2019 marked the seventh anniversary of the commencement of the Personal Property Security Act 2009 (Cth) (‘the Act’) and the accompanying Personal Property Security Register(‘PPSR’). This is also the date that registrations on the PPSR began to expire. Failing to renew existing registrations on the PPSR can have serious and detrimental consequences for secured parties.
What is the PPSR?
The PPSR is a publicly accessible online notice board on which secured parties can register their security interests in personal property held or in the possession of the party granting the security interest. For example, a vehicle hire business may register a security interest over its leased vehicles, or a supplier of goods on credit terms may register a security interest over the goods supplied.
Registering a security interest on the PPSR provides the secured party with priority rights over competing secured parties. The general rule is the earliest in time has priority over those interests registered later in time. However, that is not all. To be an enforceable registration, it must be complete and valid, with no defects.
Common Defects
The PPSR is a self-service notice board with no verification or authentication process. This means that once a security interest is submitted, it is automatically registered on the PPSR. Consequently, there may be registrations on the PPSR that have defects, which may render the registration invalid and unenforceable against third parties.
Common defects include:
- inaccurate or incomplete description of the granting party or the secured party;
- inaccurate or incomplete description of the personal property used as security e.g. motor vehicles must be identified with a serial number;
- incorrectly identifying or failing to identify the type of security interest e.g. transitional, Purchase Money Security Interest;
- failing to register a security interest within a certain time period; and
- failing to demonstrate an adequate underlying security agreement forming the basis of the security interest and in this regard uploading a copy of the document or agreement creating the security interest is best practice.
Consequences
Whilst some types of defects will render a registration completely ineffective, others will cause a security interest to lose its priority over later registered interests. In the instance where the registration is completely ineffective, the security interest is considered unperfected. In the worst case, ownership of the security will vest in the granting party if it becomes insolvent, causing significant financial losses to secured parties unable to call upon the security they thought they held.
Time to Review
The beginning of the year is an ideal time to review all existing registrations on the PPSR, regardless of whether they are due to expire this year. The review process should be holistic, ensuring that every aspect of the registration is valid. This may involve reviewing terms of supply or lease agreements and reviewing party and collateral details to ensure they are complete and accurate.
Trinity Law can assist you or your business in navigating PPSR matters to ensure that your interests are safe-guarded against the pitfalls of defective registrations. We can also advise on, and submit registrations on your behalf.
