By Melissa Higham - 11 May 2010
Under NZ Personal Property Securities Law this is not always
true.
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.