Up until now, leases or bailments of certain serial numbered
goods (such as motor vehicles) for a term of 90 days or more were
deemed to give rise to security interests under the Personal
Property Securities Act 2009 (Cth)
("Act"), and therefore had to be
registered on the Personal Property Securities Register
("PPSR") to protect the lessor's
interest in the event of the lessee's bankruptcy or insolvency
and as against bona fide transferees for value.
From 1 October 2015, this 90 day requirement will be removed,
with the effect that a lease or bailment of serial numbered goods
for a term or 1 year of less will no longer give rise to a security
interest under the Act.
Short term motor vehicle and plant and equipment hire businesses
in particular will benefit from these changes, as less hires are
likely to require registration on the PPSR. This will reduce the
cost of compliance for these businesses.
It is important to note that these changes do not apply
retrospectively, so any lease or bailment of a motor vehicle for 90
days or more entered into prior to 1 October 2015 should still be
registered on the PPSR. Further, if the lease or bailment is for an
indefinite term, or there is any prospect that the lease or
bailment may be extended so as to exceed 1 year (for example, if
the lease or bailment is renewable at the end of the term, whether
automatically or at the option of either party), then this
arrangement will still be caught by the Act.
WHAT DO YOU NEED TO DO?
If these changes affect you, you should review your pro forma
documentation to ensure that it is clear that any lease or bailment
is not for an indefinite term and can under no circumstances exceed
1 year. If you do not have a provision in your documentation to
this effect, then we recommend that you include one. If your
documentation does not include a specific end date or if there is
any possibility that a particular lease or bailment may exceed 1
year, then you should continue to register that arrangement on the
PPSR from the outset.
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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