Log in before Personal Properties Securities Register 'transitional period' ends

SECURED parties must register any ‘transitional security interests' on the Personal Properties Securities Register (PPSR) before the end of January 31, 2014 Canberra time. Otherwise the priority of any security interest may not be preserved under the Personal Properties Securities Act 2009 (PPS Act), which came into effect on January 30 last year. Examples of transitional securities interests (TSIs) that fall into this realm are those that have been created under leasing and hiring arrangements; retention of title supplies; and certain commercial consignment arrangements.

The PPSR regards a TSI as an interest in personal property that, in effect, secures payment or performance of an obligation which existed prior to January 30, 2012. TSIs also include security interests that did not exist prior to that date, but were created under a security agreement that existed prior to January 30, 2012.

An example could be goods supplied in March 2012 under a retention of title (RoT) agreement that was created in December 2011, which may give rise to a TSI.

TSIs can also include ‘PPS leases', which are generally leases for a term of more than one year, or for certain serial numbered goods, such as a car, for a term of more than 90 days.  The PPSR uses the term 'temporary perfection' to describe the process which currently preserves the priority status of a TSI.

If the deadline is not met, temporary perfection for the TSI will not apply from February 1, 2014, which may cause future complications of arrangements. Registration of a TSI is free.

Although there will still be the facility to register TSI on the PPSR after January 31, 2014, choosing to hold off registering until after that date will result in loss of the benefit of the transitional provisions.

What this means is that the 'perfected' status of the security interest will only begin from the time of registration on the PPSR, instead of the earlier date allowable under the transitional provisions if registered before the end of January 31, 2014.

If a security interest loses its 'perfected' status its priority ranking will not be preserved. This means another person with a security interest in the same collateral with a higher priority ranking, such as secured party who registered during the transitional period, may be paid out ahead of you in the event that the grantor (the person who hires or buys the goods, or borrows money) defaults.

There is also the risk that if the grantor enters bankruptcy or insolvency and a security interest has not been perfected at relevant times, the security holder will lose their security interest altogether.

From January 30, 2012, the PPS Act established a new system for the creation, priority and enforcement of security interests in personal property, which is generally all property other than land, fixtures and certain statutory interests. The PPS Act generally applies to security interests in goods located in Australia, or to the grantor of the security interest being an Australian entity.

The centrepiece of the PPS Act is the national Personal Property Securities Register (PPSR) on which security interests in personal property may be registered.

http://www.ppsr.gov.au/

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