Keep an eye out: PPSR registrations

Under the Personal Properties Security Act 2009 (Cth) (PPSA), a person can register an interest in personal property (called a security interest) on the Personal Property Security Register (PPSR). When conducting business with a customer whereby the customer may receive goods or services prior to payment of same, it is prudent to secure payment by the customer by taking a security interest in the customer’s personal property so if they do not fulfil their obligations, usually by failing to make payment for the goods/services provided, you can enforce your security interest in that property so as to ensure payment is made. Examples of common security interests granted over personal property include:

  • a fixed and/or floating charge;
  • a chattel mortgage;
  • a hire purchase agreement;
  • a consignment; and/or
  • a lease of personal property.

A security interest can only be registered where there is a transaction or agreement between the two parties and this agreement has to be consensual/contractual to secure the repayment of a debt or performance of an obligation. Further, just because a person may be owed payment for providing a service or goods, this does not entitle them to register on the PPSR – there must be a valid agreement in place which creates a security interest.

The period of registration of a security interest on the PPSR lasts 7 years with respect to consumer property (eg. privately owned vehicles such as cars, motorbikes, caravans and boats) whereas a security interest is registered for an indefinite period of time with respect to commercial property (this is property used to carry on a business under an ABN). However, registrations can be discharged earlier upon request by the person who has granted the security interest.

As time goes by and you cease to trade with a customer/supplier, it is easy to overlook the customer/supplier’s security interest remaining registered on the PPSR over your business/goods. Likewise, you may retain a PPSR registered security interest over a former customer/supplier long after you have ceased doing business with that customer/supplier.

It is important to review all PPSR registrations both held by you and registered over your organisation on a regular basis and ensure that all PPSR registrations are valid. Businesses are often in for a shock when they seek new finance or to dispose of part or all of their assets only to find that there are numerous out of date PPSR registrations which need to be urgently removed.

Upon written request to the registered security holder, the security holder is required to discharge the security interest registration within 5 business days. Larger institutions will usually have a designated PPSR officer who will attend to the deregistration request within the required timeframe. However, this isn’t always the case and in some instances a request is met with no response or a refusal. This may lead to the deregistration process taking much longer if you need to then apply to the PPSR Registrar or the Court in order to have a security interest removed.

On the other hand, if you are a party who has been requested to remove your PPSR registration, if it is not discharged within the required 5 business days, you will be in breach of your legal obligations under the PPSA potentially resulting in a fine being imposed.

If an application to the PPSR Registrar is required, the process can take some time and so a decision may not be made for weeks or months or at all if it involves a legal dispute. However, if the matter is urgent, it will be more efficient (albeit also more costly) for a person to apply to the Court for an order to have the registration removed. As such, in order to avoid these issues, it is imperative that you maintain a regular and up to date record as to what security interest registrations you have registered on the PPSR or what interests are registered by others against your personal property.

The team at Wisewould Mahony have extensive knowledge and experience with PPSR registrations and the issues that may arise with respect to maintaining and removing PPSR registrations.