From 1 October 2015, short-term leases of serial numbered goods will no longer be deemed security interests under the PPSA. Businesses should review their current PPS policies and, where appropriate, implement changes to processes, as Partner Karla Fraser and Lawyer Katharine Ward explain.
The Personal Property Securities Act 2009 (Cth) (the PPSA) deems certain arrangements, including 'PPS leases', to be security interests.
'PPS lease' is defined in sub-section 13(1)(e) of the PPSA to include a lease or bailment for a term of 90 days or more of goods described by serial number. Serially numbered goods are, principally, motor vehicles, watercraft and aircraft.
A security interest in these goods needs to be separately registered, by reference to the serial number, to prevent the secured party's interest being extinguished by the property being sold or leased to a third party.
From 1 October 2015, the PPSA will be amended to remove sub-section 13(1)(e) and there will only be a single threshold for deeming certain transactions to be 'PPS leases'. Only leases or bailments for a term of more than 12 months or indefinite terms (regardless of the type of goods leased or bailed) will be deemed to be security interests. (A lease with a shorter term will only be caught as a 'security interest' if it 'in substance' secures payment or performance of obligations.)
The change is not retrospective. It only affects transactions entered into after the amendment takes effect.
Businesses should now review existing policies and processes in relation to registering 'PPS leases' over goods described by serial number, and make appropriate changes to their policies.
If you would like to discuss the proposed amendment or its impact on your business or operations, please contact one of our PPS experts.