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Construction and Mining

What may be affected?

  • selling, bailing, leasing or hiring out construction or mining plant and machinery, either separately or as part of works contracts
  • supply of goods on retention of title terms
  • equipment leases
  • fleet management services, and/or fleet rental services
  • selling or buying materials.

What is not affected?

  • land, fixtures on land or interests in land (including rentals or other payments coming from the land)
  • State/Federal government interests and licences (including mining licences).

Benefits for your business

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Protection and risk

Protection when selling or leasing equipment

If you sell goods on retention of title terms, or lease goods out to contractors and others for periods of more than two years, or for a period which in fact has lasted more than two years, then registration can protect you if you claim a purchase money security interest (PMSI) on the register.

PMSI status can give you priority even over other earlier registered interests in that property, such as that of the customer’s bank.

Motor vehicles should be registered against their serial number, not just against the name of the grantor (lessee or purchaser of the goods from you).

This will protect you in case the goods are sold on by your customer. The serial number will usually be the Vehicle Identification Number.

Some portable mining and construction equipment might not meet the definition of motor vehicle under the PPS Regulations.

If it has a serial number, is built to be propelled on land by a built in motor that is over 200W power and it is capable of going over 10 kph, it will meet the definition.

Protection when buying goods

When buying goods—searching the register helps you make an informed decision.

You can check whether the valuable goods you want to buy, such as yellow goods, motor vehicles and machinery, are being used as security for a debt or other obligation.

Whilst you might be protected even without a search, because the goods are sold in the ordinary course of business, (or in the case of motor vehicles, are bought from a licensed dealer), a search gives you extra peace of mind that you are getting the property free of any security interests over it.

Important note:  When searching you can search against the serial number of motor vehicles and/or the relevant grantor identifier, an ACN (Australian Company Number) for example. 

Protection when your goods are on sold

A correct registration can keep you first in line even when your customer has sold the goods you have a security interest in.

Your security interest can continue to the proceeds of the sale.

If the goods are equipment that was not supposed to be sold without your permission, you may have a claim to goods as well as the proceeds (up to the value of your debt claim against them), though the claim to the actual goods could sometimes be defeated by the interest of end-purchasers from your customer.

Protection when your goods are mixed

When goods are mixed together so they have lost their own identity (eg. Ingredients to make concrete), a registration can help protect your interest.

You may still be able to claim a proportionate interest in the manufactured or processed end-product, or claim a like proportion of its value.

Protection when your goods are installed/added to other goods

If you have a security interest in goods that are added to other goods, such as tyres installed on trucks, your security interest in the tyres continues. Registration prior to installation helps protect your claim against later dealings with the trucks, other than for certain buyers or lessees of the trucks (see above on buyers).

Goods left on site or off-site

Depending on the terms of the contract, there may be goods left on site which have interests which should be protected through registration.

This includes:

  • protecting the contractor‘s (or other ownership interest in) temporary works (e.g. scaffolding) to be removed at the end of contract
  • the principal’s interest in goods paid for fully or partially by the principal but which are in the possession of the contractor; ‘step in’ or ‘take out’ rights for the principal to use goods on site to finish the contract in case of contractor default.

    Retention monies

    Construction contracts commonly provide that monies owing by either party may be retained by the other party pending stage completion or events.

    The retaining party should consider registration of their interest in the monies as an ‘account’.

     

    Increased financing options

    PPSR provides increased financing opportunities for the construction and mining industry

    For example, you may borrow against a broader range of collateral such as building supplies and other assets (other than land), and lenders (including lessors and retention of title suppliers) can protect their position more easily than under the previous law - and with extra benefits - are more assured to lend against collateral.

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

    Jump the queue

    Priority rules decide which secured party ranks higher and determines who can be paid out first from the collateral

    The rules are generally, first in time, first in line (i.e an earlier dated registration beats a later one over the same collateral). An important exception is a PMSI.

    If your registration falls into one of the following categories, you may have a PMSI and need to make sure you register correctly to protect yourself.

    Does your registration:

    • involve a lease for a term of
      • more than two years
      • up to two years but includes options to renew so the total term might exceed two years
      • up to two years or an indefinite period and the lessee has uninterrupted possession for more than two years. (Note: this definition applies to leases entered into from 20 May 2017. For leases entered into before this date, the earlier PPS leases definition still applies) see Leases and Bailments
    • secure payment of credit that you gave for the purchase of the particular property that you sold (e.g. retention of title, or loan finance for a particular asset to be purchased)
    • involve a commercial consignment