Security interest in personal property

The PPSR is established under personal property security laws (PPS) and governs the creation, enforcement and priority of security interests in personal property, like leases over motor vehicle.

What is personal property?

Personal property is any form of property other than land and any buildings and fixtures which form part of land. Personal property includes physical materials like cars, boats, machinery, crops and intangible like as shares, intellectual property and contract rights.

Example: A license to use a set of building designs will be personal property under the PPS if the license is transferable.

What is a security interest?

A security interest is an interest, created by an agreement, that secures payment or performance of an obligation. If a debt is not repaid, the person with the security interest will be able to take the property subject to the agreement. For example, a security interest arises where a supplier of building materials, under their terms of trade retains title in those materials until payment is received from their client.

A lease of personal property for a term of at least one year will also create a security interest under the PPS. Shorter term lease may also create a security interest in relation to goods containing a serial number provided certain conditions are fulfilled.

Other examples of security interests include charges (fixed, floating or both), director’s guarantees, chattel mortgages, pledges, consignment, hire purchase agreements and a lease of personal property (such as equipment and motor vehicles) for a term of at least one year.

The Personal Property Securities Register

The PPSR is a register that enables you to register a personal property security interest. The PPSR is a computerised database that is searchable and can be accessed online.

The PPSR replaces the ASIC company charges register and the register of encumbered motor vehicles (REVS).

How to register?

To register your security interest, you need to file a single page financing statement to ensure rights are preserved as against other security holders.

The fee to create a registration ranges from $6.00 (up to 7 year registration) to $115.00 (no end date).

Should you register?

Whilst registration is not compulsory, it is recommended as it provides other parties with notice that you have an interest in certain assets. Registering your interest can give you extra rights and protections.

A security interest registered under the PPS are regarded as “perfected” security interests and have certain benefits:

• They have priority over an unperfected interest
• They survive the insolvency/bankruptcy of the entity that granted you the interest
• The interest must be dealt with to enable the sale of the personal property.

The PPS has a default priority rule meaning that in many cases the first to register their interest will have priority.

For example, you supply building materials and under your terms of trade you retain title in those materials until payment is received from your client. Under the old law your client could not transfer proper title in those materials to a purchaser, even if a liquidator is appointed to liquidate your client’s assets, until payment is made in full to you.

However, under the PPS, if you fail to register your security interest (retention of title) on the PPS register you could lose your secured status and, in the event of insolvency of your client, the goods supplied by you could become assets that are available for distribution to other creditors (including other unsecured creditors).

The PPS establishes a dispute process whereby you can appeal an incorrect registration that has been lodged against your name or property.

What can’t be registered on the PPSR?

There are some things that cannot be registered on the PPSR, including:

Land, fixtures on land or interests in land (e.g. rentals or other payments arising from land).

Liens arising in the ordinary course of business (e.g. a car mechanic’s right to retain possession of the car until their work is paid for).

Additional information can be found about the PPSR and security rights in the construction industry.

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