Proposed amendments to the Personal Property Securities Act and associated regulations
On 19 March 2014, the Personal Property Securities Amendment (Deregulatory Measures) Bill 2014 was introduced into the House of Representatives. This Bill will amend the Personal Property Securities Act 2009 (Cth) (PPSA) to simplify the deeming provisions related to leases.
PPS Leases under the current PPSA
Under the PPSA, a party is required to register a security interest in order to preserve its priority against any other future claims that might conflict with that party’s interest. The definition of security interest under the PPSA is broad, and certain leases and bailments of goods, called Personal Properties Securities leases (PPS Leases), are deemed to be security interests under the PPSA.
Currently, a PPS Lease is defined as a lease or bailment of goods:
(i) for a term of more than one year;
(ii) for an indefinite term;
(iii) where the term is capable of extension (by automatic or express extension) to a total term of more than one year;
(iv) where the actual term (ie, when the lessee or bailee has had uninterrupted or substantially uninterrupted possession of the property) has been more than one year; or
(v) where, the goods have a serial number, the term of the lease or bailment is expressly 90 days or more or, by renewal (automatic or express) is capable of being for 90 days or more or where the lessee/bailee has in fact uninterrupted or substantially uninterrupted possession of the goods for more than 90 days.
The effect of the proposed amendment to the PPSA
The effect of the proposed amendment (if it is enacted) will be that a lease or bailment of goods under an arrangement entered into for less than 12 months will only be deemed to be a PPS Lease if either:
- the arrangement is automatically renewable or renewable at the option of the parties for a total term exceeding 12 months, or
- the lessee (with the consent of the lessor) actually has more than 12 months’ uninterrupted (or substantially uninterrupted) possession of the goods.
This Bill is part of the Australian Government’s “Cutting Red Tape” deregulation agenda which seeks to cut $1 billion of red tape each year.
A broader review of the PPSA is also currently underway. Submissions on issues particular to small business closed on 6 June 2014, with an interim report on the impact of the PPSA on small business due on 31 July 2014. Submissions regarding all other issues close on 25 July 2014. The final report is due on 30 January 2015.