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Leasing company leases vehicle to retail business for use as equipment

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This case study does not cover every step of the registration process, but instead highlights some of the key questions you may have.

Australian company Utes-R-Us leases a delivery van to Cupcakes-2-U Pty Ltd for 4 years. Both parties sign the lease. Before delivery of the vehicle to Cupcakes-2-U, Utes-R-Us registers a financing statement on the PPSR.

Six months later, Cupcakes-2-U goes bust. Utes-R-Us gets their van back, while other similar creditors who didn’t register their interest on the PPSR have to line up with other unsecured creditors and are likely to only get a small portion, if any, of what they are owed.

Create secured party group

A secured party group is needed to complete a registration.

a) Secured party details - this is the organisation identifier - insert Australian Company Number (ACN) of Utes-R-Us

Utes-R-Us Pty Ltd is a proprietary limited company, which means you MUST use the ACN, not the company name or ABN. The ACN is the number the Australian Securities and Investments Commission (ASIC) issues when a company is incorporated. 

For more information see Create a secured party group.

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b)  Address for service - insert the address and email address of Utes-R-Us

The address for service allows searchers of the PPSR to contact the secured party. It will be the address details entered when setting up the SPG. The email given for the address for service will receive the verification statement with registration number and token unique to that registration number.

Note that the registered office of a business and the physical location of a business can be different.

For more information see Address for service.

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Create a registration

c) Collateral type — select commercial

As the van is used to further a business it is commercial property.

Note: in this case study Utes-R-Us could register against Cupcakes-2-U which is the customer/grantor without specifying the specific motor vehicle by its serial number. However, if Utes-R-Us choose this option it will be disadvantaged, should Cupcakes-2-U on-sell the van because the third party buyer of the van would take free of the security interest.

For more information see How the PPSR protects buyers and lessees.

 

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d) Collateral class — select motor vehicle

Motor vehicles are a separate collateral class for registration purposes.

Note: Utes-R-Us need to select that they are registering against a specific motor vehicle and enter the serial number.

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e) Registration period — for this case study 5 years has been selected

For serial-numbered property, registration can be for any period up to 7 years. In this case, the lease is for 4 years so the secured party may have chosen to ensure that the registration is in place for just longer than the lease.

f) Purchase money security interest (PMSI)? Tick the box

The lease is for more than two years and so is a personal property securities (PPS) lease, which is a super-priority PMSI. For more information see Purchase money security interests and Which security interest has priority?

g) Inventory? Leave box blank

You must state in the case of commercial property whether or not it may form part of the inventory of the grantor. As this is a delivery van to be used in Cupcakes-2-U’s business, it is not inventory. For more information see The collateral is inventory

h) Proceeds? For this case study, this should appear as automatically ticked and the words all present and after acquired property then displays in the text box below

As the 'proceeds' box is automatically ticked this enables Utes-R-Us to continue their security interest into the proceeds of any unauthorised dealings with the van Cupcakes-2-U may enter into, while it has possession, under the lease. The default type of proceeds, all present and after acquired property, means Utes-R-Us is protected if Cupcakes-2-U deals with the van.

For more information see Proceeds to be claimed.

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