A ‘perfected’ security interest normally has priority over an ‘unperfected’ one. In most cases a perfected security interest is one that’s registered on the PPSR.
Perfected security interests
The Personal Property Securities Act 2009 (Cth) (PPS Act) gives extra weight to perfected security interests. The most common way to perfect a security interest is to register it on the PPSR.
This has three main benefits:
- It gives your security interest priority over unperfected interests in the same property
- It means you security interest will continue if the grantor becomes insolvent
- You will be able to enforce your security interest against third parties.
Why priority matters
If a grantor defaults on their agreement, goes out of business or becomes insolvent, you may be able to claim the property described in your registration to cover what they owe you. But if someone else has a higher priority security interest in the same collateral, they have the first right to seize it and get their money back.
Default priority rules
Under the PPS Act, the default rules of priority for security interests are:
- A perfected interest has priority over an unperfected one
- If there’s more than one perfected interest, the priority order is from earliest registration date to latest
- If there’s more than one unperfected interest, the priority order is from earliest attachment date to latest.
- A perfected security interest that is a PMSI takes priority over a perfected security interest that is not a PMSI. See Is my registration a PMSI? for more information.
There are some exceptions to the general rules provided in this page (such as in the case of agricultural interests). Establishing which security interest has priority is a complex area of law and you should seek legal advice before proceeding with any enforcement action.
Security interests in aircraft may also be registered under the ‘Cape Town Convention’.
Under s256 of the PPS Act the International Interests in Mobile Equipment (Cape Town Convention) Act 2013 prevails over PPS Act provisions where there is an inconsistency. Two registrations, one on the PPSR and one on the International Registry of Mobile Assets, will often be appropriate.