On 30 January 2012 the new Personal Property Securities Act 2009 came into force, reforming the laws and registers dealing with securities over personal property. Each state and territory previously had its own laws which have now been brought together under one national system and online register called the Personal Property Securities Register (PPS Register).
Personal property is any form of property other than land, buildings or fixtures. It can include tangibles such as cars, art, machinery and livestock as well as intangibles such as intellectual property and contract rights. Security interests in any personal property may now be noted on the online PPS Register.
While real estate itself is not directly affected by the new regime, there are a number of implications for leasing and other real estate transactions which landlords, real estate agents and property managers in particular should consider.
Leases of real property which may include lease of goods
Leases of real property not uncommonly include a lease of equipment or other personal property belonging to the Landlord which the Tenant may use while leasing the premises.
The Landlord, as the owner of these leased items of personal property, is able to register their interest on the new PPS Register. The lease of the premises itself would not be registered on the PPS Register, nor are fixtures to the premises. Landlords sometimes lease other goods to their Tenants, such as office or factory equipment or furniture and other items that are not fixed to the premises – the landlord's interest in these items can be registered.
Landlords should seriously consider making such a registration to protect the ownership of their property. If the Landlord does not register, then they run the risk of someone else gaining a superior interest in their property. For example:
- a third party could 'purchase' the leased equipment from the Tenant and the Landlord may have no recourse against the purchaser to regain their property (although the Landlord could still make a claim against the Tenant); or
- if the Tenant becomes insolvent or goes bankrupt, then the Landlord's leased property could vest in the (for example) Tenant's liquidator and the Landlord would lose title to the property even though it owns the property.
These are real risks that Landlords have not previously had to consider before the introduction of the PPS laws. The new PPS system often gives more weight to possession of the goods, rather than ownership. Therefore, as owners of property you may now have to consider registering your ownership interest in any circumstance where you part with possession of your property.
If Landlords are entering into any new leases which may involve the lease of any items of 'personal property', then Kott Gunning is able to provide advice and help with protecting Landlord's interests on the PPS Register.
Other lease implications: Bond payment and property of defaulting tenants
Other interests that Landlords are often granted under leases include:
- bond payments held as security for the Tenant's obligations under the lease; and
- any rights which the Landlord may have to deal with Tenant's property kept on the premises upon default.
These rights may also be capable of registration on the PPS Register. These are quite common lease provisions, however, depending on the particular lease there may be other interests that the Landlord may wish to protect under the PPS laws.
As mentioned above, Landlords should consider registering interests such as these to prevent other parties gaining a superior right in, say, bond payments or the defaulting Tenant's property. We suggest that Landlords should seek advice with regards to their specific lease document before new leases are entered into.
Current interests temporarily protected – review your lease
Many existing leases as at 30 January 2012 will include provisions we have mentioned above. The PPS laws provide temporary protection of Landlords' interests for a two year transitional period only. While there may be temporary protection, Landlord's are still able to formalise their transitional interests on the PPS Register and, in any event, may wish to conduct a review of their current leases before the transitional period expires on 29 January 2014.
Purchase of real property including goods or other property
Purchasers of businesses or other real estate should consider whether the purchase includes any personal property. Common types of personal property included in business purchasers might be:
- inventory or stock;
- trade marks or other intellectual property;
- rights under contracts.
Prudent purchasers should now be conducting searches on the PPS Register of all such personal property before purchasing to check that no other person has a prior registered interest in it.
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.
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