Security Interests and PPSR Searches
- a security interest is a personal property right which can be protected by registration
- security interests are created by consensual agreement for personal property to be secured against the performance of an obligation or repayment
- a security interest can be protected by registration on the PPSR
- a prudent buyer or lessee should conduct a PPSR search
What is the PPSR?
The Personal Property Securities Register (‘PPSR’) is a government register which records security interests over personal property.
What is a security Interest?
A security interest is a personal property right which can be protected by registration.
Personal property refers to tangible items and does not include real property such as land (but can cover fixtures and fittings on the land). Most goods will classify as personal property.
Security Interests arise by agreement between parties where one party offers up their personal property as security. To create a valid security interest the agreement must be made in writing:
- between consenting parties; and
- for the performance of an obligation or the repayment of dept to be secured.
Notably, in absence of the above criteria some forms of leases, bailments and consignments create a registerable security interest.
For example: Allan borrows money from Sunshine Loans to purchase a motorbike. Allan offers up that motorbike as security to the Sunshine Loans as the lender. Meaning, if Allan then defaults on the loan, Sunshine Loans can claim their security interest in the motorbike by recovering the personal property, being the motorbike.
Why Register a Security Interest with the PPSR?
Registering a security interest protects that interest against other interest holders and gives the secured party priority. A lender who fails to register their interests, risks another party with a registered security interest getting priority.
For example, Sunshine Loans fails to register their interest in the motorbike and Allan goes insolvent. Storm Cloud Loans also has a security interest in Allan’s motorbike and has registered this interest in the PPSR. The security interest of Storm Cloud Loans takes priority to the security interest of Sunshine Loans.
What is a PPSR Search?
A PPSR search is a search of the registered security interests recorded in the PPSR. This search is typically conducted against the Seller or Lessor of personal property. A prudent Buyer or Lessor would conduct this search to ensure that the property is not at risk of being repossessed by the holder(s) of a security interest.
For example, Mike purchases the motorbike from Allan and does not conduct a PPSR search. Allan goes insolvent and Storm Cloud Loans enforces their security interest and repossess the Motorbike from Mike.
Property Law is a broad area, encompassing: conveyancing, development, and commercial leases. Salerno Law has experienced lawyers dedicated to each of these fields. Mistakes in property law can be financially devastating, which is why expert assistance is vital. Salerno Law can advise and assist with the registration of security interests and PPSR.
By Aspen Roggeveen