New legislation is in place in New South Wales regulating security over ‘goods’ such as personal property, livestock, fish, crops and wool.
The Security Interests in Goods Act 2005 (NSW) became operational on 1 March 2006 and replaces the previous system established under the Bills of Sale Act 1898 (NSW) and the Liens on Crops and Wool and Stock Mortgages Act 1898 (NSW).
Key points to note in relation to the new system:
Security over goods can continue to be registered on the General Register of Deeds. Bills of sale can now be registered for an unlimited period and no longer need to be renewed every five years.
The new system regulates the priority of competing security interests in goods. The general rules of priority are (unless a deed of priority is in place):
Registered security interests will rank in priority in the order in which they are registered.
An unregistered security interest will only take priority over a registered security interest if the latter is registered after the holder of the unregistered interest takes possession of the goods.
For this reason, when taking security you should ensure the mortgagor has not granted an unregistered security interest to a third party who has already taken possession of the goods.
Following the commencement of the Corporations Amendment Regulations 2006 (No. 2) on 23 March 2006, any security granted by a company over goods in NSW which is registered on ASIC’s Register of Company Charges will not need to be registered on the General Register of Deeds.
There is an increased focus under the new legislation on agricultural and aquaculture goods and the new legislation applies to various types of livestock, fish and crops. There are special provisions for taking security over these goods, including that security over these goods:
must be in the prescribed form as set out in the new legislation;
must be registered within 45 days of their execution; and
in the case of a crop mortgage, will expire five years after registration.
Security over motor vehicles and boats continues to be regulated by the Registration of Interests in Goods Act 1986 (NSW).
Existing bills of sale, crop liens and livestock mortgages registered under the previous system are still valid and need not be amended or registration renewed as a consequence of the new legislation coming into effect. However, before existing security registered under the previous legislation expires, new security should be taken and registered under the new legislation.
The above information is a general overview of some changes arising from the introduction of the Security Interests in Goods Act 2005 (NSW). The advice is general in nature and should not be relied upon as legal advice.
This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.
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Businesses should review their standard form contracts for unfair terms to ensure they do not fall foul of the new laws.
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