Today, 30 January 2019, is the seven-year anniversary of the Personal Property Security Register (or ‘PPSR’). In its short life, the PPSR has become extremely prevalent in Australia, as a cheap, fast, and efficient means of providing security for a broad range of personal and commercial transactions. Even if you have never heard of the PPSR, it is very likely that you, or someone you know, is party to some kind of interest recorded on that register.
Just what is the PPSR?
The PPSR is a national register of Security Interests updated in real time and accessed publicly. Security Interests arise when one party (the Secured Party) has some security rights over personal property (Collateral) which give that party a right to recover that property or proceeds of its sale in certain circumstances.
For example, if you took a loan out to buy your car, it is very likely that the lender has a Security Interest in your car, and that this Security Interest is recorded on the PPSR. If you default on your loan, the lender will likely repossess your car and sell it to pay off the balance of your loan.
What kinds of things can be collateral?
Almost any form of “Personal Property” can be recorded on the PPSR. This could be anything, from cars or other machinery, to art, antiques, tools, equipment, or even a commercial fitout for a business.
Why register a Security Interest?
Being registered on the PPSR is not essential for a Security Interest to be enforceable. However, registering a Security Interest over property can give that interest priority over other unregistered or inferior interests in that property.
Registration of a Security Interest also puts third parties on notice. This enables the Secured Party to recover the collateral even if it is sold or given away. This is why it is very important for a purchaser to always conduct a PPSR search every time you buy personal property (for example, a used car) – otherwise you may find someone knocking on your door after payment seeking recovery!
What are the consequences of allowing a Security Interest to lapse?
Security arrangements are the grease that allow many of our biggest commercial transactions or purchases to go through. By providing a system where Security Interests are protected, people can comfortably lend money, safe in the knowledge that they will be repaid if things go wrong.
If a Secured Party allows their Security Interest to lapse, then there is a risk that the Security Interest might fall behind other Security Interests in priority, or they may not be able to recover the collateral if the property is sold and the debt not repaid.
What guarantees a good security?
- Registration that complies with the Personal Property Securities Act 2009 (Cth)
- Registration of a Security Interest must be done within 20 business days after the creation of a security agreement
- Identifying the correct collateral class
- Ensuring serial numbered goods are correctly identified
If you need any advice or assistance with security agreements or the PPSR, please contact a member of our Business Services team: