The Personal Property Securities Act 2009 is a law regarding security interests in personal property and came into effect on 30 January 2012.
Personal property includes goods such as machinery, cars, boats, crops, livestock and equipment. It also includes intangible items, such as intellectual property and financial property such as shares. Personal property is all forms of property other than land, building and fixtures and affects all ‘security interests”.
Security interest is an interest that secures payment of a debt or other obligation regardless of the form of the transaction and includes:
- security interests with which we are familiar – charges, mortgages, pledges
- arrangements not previously considered security interests - eg conditional sale agreements, retention of title clauses, leases of goods, consignments, hire purchase agreements
The Personal Property Securities Register is now the single, national register of security interests in personal property in Australia.
A security interest must have ‘attached’ to collateral in order for the security interest to be enforceable against the grantor. Attachment is similar to the concept of the creation of legally binding relations.
All PPSA security interests will need to be perfected in accordance with the procedures set out in the PPSA, which include registration, possession or control. In the majority of circumstances, registration will be the appropriate means of perfection.
Perfection is a technical concept particular to the PPSA. Perfection is a form of protection for a secured party that is stronger than the mere attachment of their security interest. In order for a security interest to be perfected it must have attached, be enforceable against third parties and is either registered on the PPS Register or the collateral is in the possession or control of the secured party.
Perfection of security interests is important because:
- a security interest has to be perfected to survive insolvency of the grantor
- an unperfected security interest:
- will be void if certain insolvency events occur, e.g. the grantor is wound up or made bankrupt, or an administrator is appointed (certain exceptions apply)
- may be extinguished as a result of the grantor's dealings with 3rd parties
- may suffer loss of priority (generally a perfected security interest has priority over an unperfected security interest).
We recommend that you review all documents used in your business to determine if any security interest is or may be granted.
If security interests are granted under those documents:
- amendments will need to be made to account for the PPSA
- procedures will need to be put in place for the security interest to be perfected
Buyers can and should check the PPSR to see if the valuable second-hand goods they want to buy are debt-free and free from encumbrances. The search facility to check before you buy is accessible 24/7, is low cost, easy and immediate as is registering a security interest in personal property.
Businesses selling on terms such as retention of title, or leasing out valuable goods should consider registering their interest on the PPSR. Registering an interest in goods which a business hasn’t yet received payment for can help it recover the debt should a customer not pay or become insolvent.
As a consumer, you can protect yourself against purchasing goods that could be repossessed, by using the search function on the PPSR.
If you are buying goods from a retail shop, you generally do not need to be concerned with the PPSR. If however, the business does not ordinarily sell the goods you are buying and they are valued at more than $5000, you should check the PPSR. For example, artwork on an office wall.
If you are buying goods privately and they are valued at $5000 or more, you are able to check the PPSR to ensure there is no security interest over them.
For other purchases over $5,000, you must search by the name of the vendor, referred to as the grantor in the PPSR and you will need to know their name as it appears on an official identification document, such as a driver’s licence and their date of birth.
You must have the vehicle identification number (VIN) or chassis number for motor vehicles, caravans and trailers, and the hull identification number (HIN) or official number for boats prior to searching on the PPSR.