A case study about an automotive painter who claims for unpaid work after a customer goes into liquidation. Learn more about retention of title, perfected security interests and commingled, processed or manufactured goods.
What may be affected?
selling, financing, bailing or leasing out cars, trucks, trailers, caravans
selling spare parts on terms
leasing vehicles to employees
buying second-hand vehicles.
What is not affected?
- short term vehicle hire (where there is no finance lease and it is for a hire period less than two years or does not last more than that in practice).
How does it benefit my business?
The PPSR has replaced registers such as REVS and VSR and is now the single national register for motor vehicle encumbrances.
If you are buying a second-hand vehicle privately, you should check the vehicle’s VIN on the PPSR to see if it might be repossessed.
You will also get other useful information about the vehicle including any available records of police interest in the vehicle and whether the vehicle is recorded as having been written off.
The PPS Act (PPSA) protects purchasers when buying or leasing a vehicle from a licensed motor dealer. If you are buying or leasing from one, there is far less reason to search the PPSR because you will be able to enjoy your ownership or lease free of any security interest, even if it is registered.
For more information see Motor vehicle searching and buying protections.
Protection when dealing in spare parts
Often vehicle spare parts are sold on the basis that the purchaser takes the spare parts but legal title remains with the seller until the parts have been paid for in full.
Under the PPSA, these types of arrangements are likely to create a security interest in the spare parts.
If you are selling or supplying your spare parts on such terms, a registration on the PPSR protects your interest in the goods, should your customer default and go broke. It also helps you to protect your interest in the proceeds even if the goods/parts are sold on, or if parts are installed onto other goods.
For more information see Case study:
A repairer’s lien, which allows a repairer to keep a car until paid for work done on it, is not a security interest under the PPS Act.
This is because repairer’s liens arise by general law, not through the security agreement (ie terms and conditions).
Liens of this kind don’t need to be registered on the PPSR. The PPS Act (PPSA) recognises their priority over other security interests.
For more information see:
Under the PPS Regulations, a motor vehicle is defined as anything that is designed to be propelled wholly on land and capable of going over 10kph and with power of over 200W, or something which can be towed at such speed (eg a trailer), and that doesn’t run on track or rails.
This can cover many yellow goods, depending on their speed. If it doesn’t fit the bill, then they can’t be registered against serial number.
Motor vehicles (or watercraft or small aircraft) should be registered against the serial number (VIN or chassis number) if and when known, as well as against the customer.
This will protect you if your customer wrongly disposes of leased or hired goods (eg subleases them) without your consent.
For commercial property, you don’t have to register against serial number as well as the customer’s details, but it gives you added protection if you do.
BUT if your customer is an individual not a company, AND the property is consumer property, then you MUST register motor vehicles, watercraft or aircraft against the serial number, and CANNOT be registered against their name and details.
If you are a dealer, you may be able to get finance using your floor stock as collateral. A variety of consignment and finance leasing arrangements may be used. The PPSR gives financiers and suppliers more confidence that they can protect and enforce their interests.
You may be able to get finance using inventory, like spare parts, as collateral.
If your customer goes broke, priority rules decide which secured party ranks higher and determines who can be paid out first from the collateral.
The rules are mostly first in time, first in line (an earlier dated registration beats a later one over the same collateral).
An exception to this rule is a purchase money security interest (PMSI).
If properly registered, a PMSI gives priority over earlier registered security interests over the same collateral, such as a bank with an earlier registered security interest over all of the grantor’s present and after-acquired property.
Even though the bank is first in time, the PMSI holder will jump ahead and be first in line.
Retention of title arrangements (eg over spare parts), and leasing and consignment arrangements, will usually be PMSIs, and this super-priority will be available provided the supplier/lessor/consignor registers and claims a PMSI, and does so prior to delivery of the goods if they are used as part of the customer’s inventory (or within 15 business days otherwise, eg for equipment used in the business).
You don’t need to register for each ROT delivery. A registration against ‘motor vehicles’ will cover you for any future supplies of motor vehicles to that customer.
PPSR provides increased financing opportunities.
Financiers can view interests registered against your goods or assets, making it easier for them to decide whether or not to lend to you.
Financiers now have a have a single, national register to record any security interest that they have.
This makes the process easier and gives them more confidence that their interests are protected and enforceable.
It also provides greater visibility for those interested in dealing with the property, as they can check all other PPSA security interests registered against that property.
PPSR case studies
In this case study, a car repairer exercises its right to retain a vehicle while waiting for mechanical work payment. It includes information about repairer's lien and proceeds.
A case study about a manufacturer’s security interest in the wheels it makes and sells. Find out more about concepts such as retention of title, accession and registering on the PPSR before supplying goods to help protect your business.
A case study about a PPSR security interest being registered against an excavator during a financing deal.