Q: On a new financing, do
we really need to obtain an Ontario PPSA1 acknowledgment
or estoppel letter from a motor vehicle lessor with a prior
registration filed against our corporate borrower? Our borrower
says it is clear that the prior registration is a motor vehicle
lease, and it does not want to have to chase it down before
A: Like applying sunscreen,
obtaining PPSA estoppel letters or acknowledgments for motor
vehicle lease registrations can seem tedious at times.
However, a lender could possibly get burned if it fails to do
The problem stems from Ontario's "check the box"
registration system for recording the classes of collateral which
are subject to a security interest, and the ability of a secured
party to shelter or perfect more than one security agreement under
a single registration.
Out of an abundance of caution, motor vehicle lessors will
typically check the boxes for "equipment", "motor
vehicle" and "other" when registering to perfect a
security interest in a motor vehicle. They will also record
the make and model particulars of the motor vehicle and its VIN in
lines 11 and 12 of the financing statement. However, they do
not normally also include a general collateral description in lines
13 - 15 of the financing statement (a
Under Section 46(2.1) of the Ontario PPSA, where a financing
statement sets out a classification of collateral and also contains
words that appear to limit the scope of the classification, then
the secured party may only claim a security interest in the class
as limited. Although including a GCD in a financing statement will
trigger Section 46(2.1) to limit the scope of the collateral,
merely completing the motor vehicle descriptions in lines 11 and 12
will not do so. In addition, some cases have suggested that
including a GCD only limits specific classifications like
"accounts", "inventory" and
"equipment", and does not limit the "other"
What this means is that if an Ontario PPSA acknowledgment is not
obtained, a motor vehicle lessor could possibly use its
registration as described above to perfect a security interest in
other equipment of the borrower and not just the motor vehicles
listed in lines 11 and 12. Some motor vehicle lessors are
larger organizations that may also offer general equipment
financing to their lessees. So the potential is there for
other security agreements covering general equipment assets to be
sheltered by the single registration made by the motor vehicle
lessor. Obtaining a proper form of acknowledgment from the
motor vehicle lessor will serve to limit the scope of the
lessor's security interest to the specific vehicles listed.
It is true that some lenders assess the risk of a specific motor
vehicle lessor providing general equipment financing to their
borrower to be remote in many cases, and therefore choose not to
seek an acknowledgment. However, obtaining an acknowledgment
is a relatively quick and inexpensive way to eliminate this risk of
getting burned. Despite what your borrower may suggest, most
motor vehicle lessors are well equipped with staff to issue the
Ontario PPSA acknowledgment letters promptly upon
1 Personal Property Security Act, RSO 1990, c
P.10, as amended [OntarioPPSA]
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