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On 30 January 2012 the Personal Property Securities Act 2009 (Cth) (PPSA) will commence, creating a single, national electronic register for all personal property security interests. But how will this legislation affect other property and business transactions?
As we have previously outlined, the PPSA will consolidate a number of State and Commonwealth Acts that deal with validity, priority, enforcement and extinguishment of security interests in personal property and establish a national register for the registration of these interests, the PPSR.
It is important that security interests in personal property are registered in the PPSR, as registration will be required to prove ownership after the 2 year grace period has expired. Personal property excludes land, buildings and fixtures attached to land. A lease of land or a lease of fixtures (such as a building) on land is also expressly excluded from the operation of the PPSA. However, the PPSA will affect the priority of competing security interests over chattels located on land.
Consequently, clauses in leases which deal with abandoned goods, fit-out and security over a tenant's fittings should be reviewed by the landlord to determine whether registration is required in the PPSR in order to protect the landlord's interests.
It is also important that landlords consider any leases entered into before commencement of the PPSR. A person who holds a registrable interest before the PPSR commences is given a 2 year grace period in which to register their interests. During this 2 year period, interests in existence before the commencement of the PPSR will be given temporary priority. These interests are known as transitional security interests (TSI's). During this 2 year period, a TSI is given priority over any interest created on or after 30 January 2012 that is registered on the PPSR.
In order for a TSI to retain its priority after the expiry of this 2 year period, the interest must be registered in the PPSR before 30 January 2014. Priority between TSI's will be determined in accordance with priority rules in existence at the time the interest was created. There is no registration fee payable to register a TSI during the 2 year grace period.
New security interests created after 30 January 2012 will attract registration fees between $7.40 and $144.80, depending on the duration of the registration and whether the documents are lodged online or in person.
Buyers of a business should also search the PPSR for any registered interests over the business assets and obtain appropriate releases from any security holders who are registered on the PPSR.
Search fees for the PPSR register range between $3.70 and $11.60, depending on the particular search required.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
