On 20 May 2017, the Personal Property Securities Amendment (PPS Leases) Act 2017 (Cth) (Amendment) came into effect. This is the third amendment to the Personal Property Securities Act 2009 (Cth) (PPSA) since it came into force in 2012. It seeks to relieve some of the problems previous amendments failed to solve with respect to PPS leases by increasing the minimum duration of leases and bailments that are deemed a PPS lease.
This Amendment only deals with PPS leases, with all other PPSA requirements remaining unchanged. This includes leases and bailments that are considered security interests because they ‘in substance’ secure the payment or performance of an obligation and the registration requirements for Purchase Money Security Interests.
What are the Amendments
- The new Amendments narrow the definition of a PPS lease to those leases and bailments:
- that are for a period of more than 2 years; and
- with the option to extend or renew (including automatic renewals), if the total of one or more terms might exceed 2 years.
- In the case of indefinite leases or bailments, it is only a PPS lease if it runs for a period of time that would deem it a PPS lease.
- These changes only apply to leases entered into after 20 May 2017. For leases entered into before this date, the PPSA requirements applicable at the time of entering into the lease apply.
What does this mean to you and your business?
Only the following leases and bailments that are entered into after 20 May 2017 can be registered on the Personal Property Security Register (PPS Register):
- A lease or bailment that is a PPS lease.
- A lease or bailment that ‘in substance’ secures the payment or performance of an obligation.
- An indefinite lease or bailment, when possession of the goods in question has remained with the lessee or bailee for a “uninterrupted or sustainably uninterrupted” period of more than 2 years.
If you are a lessor or bailor in a business to whom the Amendment may be relevant, it may be a good time to review your documents to check whether or not the arrangement creates a security interest and consider whether the Amendment applies. If the Amendment:
- applies, consider if:
- your current documents address PPSA adequately or if they need to be updated; and
- you should register the security interest on the PPS Register to protect your interest;
- does not apply:
- consider if the arrangement ‘in substance’ secures the payment or performance of an obligation and thus the security interest should be registered on the PPS Register; or
- do your documents provide adequate protection that includes provisions that allow you to take your goods back in the event of default by your customer?
At Bryks Lawyers we have extensive experience across the broad spectrum of PPSA. This includes reviewing documents for compliance with PPSA and ensuring that our clients’ interests are protected and enforceable. We also assist our clients in registration of security interests on the PPS Register and provide training to in-house teams on how to register properly. Start the conversation today!
This information is for information purposes only and is not legal advice. You should obtain advice that is specific to your circumstance and not rely on this publication as legal advice. Please contact us if you wish for us to advise you on any issue you may have arising from this publication.