A new Commonwealth law, the Personal Property Securities Act ("the Act") will operate from October 2011 and will have a profound affect on borrowers, lenders, manufacturers and other businesses operating in Australia. At present, each State has different laws pertaining to the registration of securities in all their various forms (e.g. Bills of sale, charges, liens, personal mortgages etc). The purpose of the Act is to consolidate the patchwork of securities registers across the Commonwealth and States and have one register for all security of personal property in Australia.
What is Personal Property?
Any property other than land is termed "personal property". This includes cars, machinery, crops and intellectual property.
Why a new Law?
The new law will make it easier for individuals and businesses to use more of their property to raise capital. A lender will give a loan or goods on credit and in exchange it will take an interest in their personal property as security. The lender will have a "personal property security".
How is a Personal Property Security recorded?
There will be an online Personal Property Securities Register (PPSR) that will allow lenders and businesses to register their secured interests. Anyone can search the PPSR to find out if a security interest is registered over the personal property.
The Register will be accessible 24 hours a day 7 days a week. It will be closed on a few days e.g. Christmas Day and Easter Friday.
A simple example:
You have a car worth $10,000. You need money and a lender advances $2,000 and registers his interest on the PPSR using the vehicle’s VIN. Once the loan is repaid, the lender will remove his registration. If you default on your loan the lender can seize the car and sell it to recover its debt.
If anyone wants to buy the same car, he would be wise to search the PPSR first. If someone does buy the vehicle, the lender will have priority over the vehicle to the value of the loan.
I want to buy a vehicle. What should I do?
People contemplating buying a vehicle should search the PPSR to see whether anyone has registered a security interest in the vehicle. If there is an entry then you may negotiate with the seller to have the registration removed or adjust the price that accounts for the amount of security interest.
I run a small business. How am I affected?
The new law will give greater certainty about whether any personal property is subject to security interests. This should increase the availability of finance and reduce costs for business. At the moment there are different registers for different types of property and each State and Territory has different registers. A potential lender has to search in different registers to ensure the property is not already encumbered.
If you are selling goods on credit and you want to secure your debt then you will register your interest on some property of your client. You may even register your interest on the actual goods you are selling. The new single national online register establishes a clear set of rules for ordering priorities between competing interests.
How about privacy issues?
The PPSR will contain very little personal information. A person may search the Register to determine if personal property is subject to a security interest. Searching the Register for any other reason will be unlawful and will be deemed a breach of Privacy Act 1988 (Cth).
Registering a security interest
Anyone will be able to make a registration using a web browser. The registration will need to describe the property so that it can be readily identified. For motor vehicles, this will be the VIN (vehicle identification number). You will receive a verification statement showing details of the registration.
Searching the Register
Users can search by entering their search criteria. You will be able to do a vehicle search using SMS.
Cost
There will be a registration fee of around $30.00 and a simple search will cost approximately $3.70. Regular or heavy users will be able to have an account that is payable monthly.
What are the likely economic impacts?
The new law has the potential to reduce borrowing rates of loans secured with personal property. Lenders will have greater certainty and lower risks associated with transactions by making outcomes more predictable.
The existence of a single Register will mean a reduction in costs of registration and searching.
The main beneficiaries of the new law are expected to be:
- Small to medium sized businesses;
- Farmers, who will be able to raise money on the security of their crops;
- Small financiers who will experience greater security.
Where to from here?
Further information regarding the Act can be found on the PPSR website, www.ppsr.gov.au ;
Do any of the statements below relate to you or your situation?
- You are a creditor and want to know if your interests are protected;
- You are a borrower and want advice;
- You lease personal property or supply goods on a retention of title basis;
- You want to buy equipment and want to make sure no one else has a prior interest;
- You have registered interests and want to ensure the new law does not disadvantage you.
If you said yes to one of the points above and you would like to know more, please contact Nathan Hardman, Commercial Law Director at McCarthy Durie Lawyers to assist you with your enquiry.
(07) 3370 5100
nathanh@mccarthydurie.com.au
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