What's mine is mine, right?

By Melissa Higham - 11 May 2010

The Personal Property Securities Act 1999 ("the Act") has now been in force for over 8 years.  Most people seem to have come to terms with what it means and what it does. However, there are still some sections of the Act that trip up even the well-informed.

Beware the risk of parting with possession of your assets.

The Act deems some things that you might not otherwise expect or realise to be security interests. Failure to register these deemed security interests can result in loss of ownership of an asset.

Examples of such things include retention of title arrangements and leases for a term of more than one year.

There have now been several cases in the courts which illustrate this point. Some unfortunate parties have found out the hard way about the implications of failing to register a financing statement in relation to their security interest. When a party which has actual possession of their assets has gone into liquidation or receivership, they have lost ownership of their assets.

Examples in the courts have included loss of portable buildings under a lease and bloodstock under a servicing arrangement.  In practice we have seen many more items lost under these provisions.

Consequently, more people are now aware of these deemed security interests under the Act, but risk still remains.   Whenever you allow another person to hold or have possession of your assets for any reason, you must always take care and seek legal advice.

Tread carefully with "leases for a term of more than 1 year".

Under the Act "leases for a term of more than 1 year" are deemed security interests.  If you fail to register such a lease, the fact that you own the asset may not protect your position. You could lose ownership.

So… what is a lease for a term of more than 1 year?

The answer to this question is fairly obvious - isn't it? Think again. The definition in the Act catches:

• "a lease for a term of more than 1 year"
• "a lease for an indefinite term"
• "a lease which is for a term of 1 year or less that is renewable so that the total term may be more than 1 year"
• "a lease for a term of less than 1 year where the lessee, with the consent of the lessor, retains possession for more than 1 year".

You must consider the overall effect of your leases to ascertain whether they could fall within the Act's definition.

Where there is even a remote possibility a lease may fall within this definition, you must register a financing statement to protect your ownership rights.

If you would like to discuss the implications of the Personal Property Securities Act 1999 on your assets or current leasing arrangements, please call a member of our team on 09 379 7333.

If you would like more information on the Personal Property Securities Act 1999 please contact Melissa Higham.