Hire and rental

Understand the benefits of the PPSR for hiring or leasing goods.

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What may be affected?

  • leasing, bailing, or hiring out any type of plant, vehicle or equipment.

  • hire purchase arrangements

  • long term operating leases

  • buying second-hand plant and equipment.

What is not affected?

  • land (including fixtures)

  • short term leases (leases under two years or indefinite hires that do not last more than two years)

  • short term hire and rental arrangements (arrangements for, or which last, for two years or less).

How does it benefit my business?

Protection when hiring or leasing out goods

Properly registering can protect your interest should any of your customers not pay instalments or go broke. Even if the goods or assets are sold on, mixed or installed onto other goods.

Making a registration helps protect your interest in your goods or assets when they are not in your possession.

If you don’t make a registration of your interest in those goods or assets and your customer goes broke before they have fully paid you, your stuff may be sold to pay other creditors first, including those such as banks who have registered security over all the property of the customer.

If you are not registered, you will be an unsecured creditor in an insolvency and may not recover much, if anything, of what you are owed.

But if you are leasing or hiring out goods you may have a purchase money security interest (PMSI) enabling you to claim super-priority over other registered claimants, provided you follow the right steps.

Protection when buying goods

When buying goods — searching the register helps you make an informed decision because you can check whether the valuable goods you want to buy are free from existing financed debt and so safe from possible repossession.

For example, when buying:

  • goods from a wholesaler other than for immediate payment (eg buying goods on retention of title arrangements)

  • expensive second-hand goods such as plant to rent out to your customers

  • vehicles (other than from a licensed motor vehicle dealer).

As a buyer, you will ‘take free’ of security interests that your seller has granted over the collateral, if the property is sold to you in the ordinary course of the seller’s business, if the property is the kind they ordinarily sell.

Puts you first in line – jump the queue

If your customer goes broke or is unable to fulfil their obligations, 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 still be first in line.

PMSIs cover leasing and hiring arrangements of goods of the kind which you regularly lease or hire out, but you have to claim a ‘PMSI’ on the PPSR, and register it before any delivery

Tip: One registration against a class of collateral (eg ‘other goods’, or ‘motor vehicles’) will generally cover your priority for future hire or rental arrangements over that type of collateral, with that customer.

Industry examples include:

  • scaffolding or work platform hires for periods that last over two years
  • yellow goods hired out to contractors and left on mining or construction sites for more than two years.
Motor vehicles – how are they defined ― why is this important?

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 a 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.

Increased financing options

PPSR provides increased financing opportunities for the hire and rental sector.

For example, you may borrow against a broader range of collateral such as stock and other assets (other than land). Benefits may include making it easier to obtain finance.

Financiers can view interests registered against the goods or assets of your business, and that makes it easier for them to decide whether or not to lend to you.

PPSR case studies

Construction worker guides crane operator in lifting a beam

Developer case study: PPSR use in contractor engagement for warehouse construction. Covers priority rights, goods commingling, and business protection.

Learn more
 A fleet of white trucks stand neatly lined up

Case study: Heavy vehicle hirer neglects indefinite lease registration on PPSR. Explores hire, PPS leases, and bailments' implications.

Learn more
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