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.
The PPSR is a register of security interests in personal property. Security interests are created by an agreement where a person can take property if a debt is not repaid.
The PPSR is not a register of property ownership. Registering on the PPSR is a way to let people know if personal property such as cars, goods or company assets have security interests over them.
Registering your security interest correctly on the PPSR can protect you and give you extra rights in the property it's registered over. This is especially important if the person who gave you the interest goes insolvent.
A registration also offers other protections such as ranking you at a higher priority over other security interests.
What is a security interest?
A security interest is a type of right in personal property that can be registered on the PPSR. It is created by a transaction or agreement between two or more parties.
This agreement has to:
be consensual (usually when parties enter into a contract of some kind) and
secure the repayment of a debt or performance of some sort of obligation.
Most agreements must meet these criteria to create a security interest. There are some security interests that are deemed to be so regardless of it they meet the above criteria, see PPS leases, bailments and consignments.
The agreement that creates a security interest doesn't have to take a specific form, but common examples include:
secured car loans
hire-purchase agreements for goods
fixed and/or floating charges or general security agreements over company assets
retention of title agreements where goods are supplied on credit
service contracts where payment is secured by a security interest in particular property
It's important to note that a security interest is not an ownership interest.
Do not use the PPSR to register your ownership of personal property unless you also have a security interest over it (such as you might if you supply your goods on credit terms).
It is recommended that you have a written agreement that records any security interests that you register on the PPSR. This can help you avoid potential disputes and enforce your interest against other competing interests in the property.
Security interest examples
Jerry wants to buy a car but he doesn't have the money to buy it outright. He applies for a loan from a bank who agrees to lend him the money.
The bank needs to make sure that they will be repaid, so Jerry agrees to put the car up as security.
The bank registers a security interest over the car, making this a secured car loan.
This is a valid security interest.
Jerry entered into a consensual transaction with the bank to grant an interest in his car to secure payment of a debt.
Jerry's car broke down, so he took it to a mechanic to repair it. When he picks up the car, he pays half the bill and promises to pay the rest later. The mechanic agrees to let him take the car (mechanics can usually refuse to release cars under non-PPSR related laws until work is paid for).
Jerry never pays the mechanic who then registers a security interest over the car. However, Jerry never consented to grant a security interest in his car to secure payment for the repairs.
This is NOT a valid PPSR security interest.
Even though the mechanic was owed money, (and could have refused to release it), the mechanic will have to consider other rights he has to get Jerry to repay the debt. PPSR security agreements will always have an agreement.
Who can register?
Anyone can make a registration on the PPSR, including businesses, individuals and organisations. Generally, it will be the person who has the security interest in the property. They are known as the 'secured party' and include:
- The lender in a secured loan arrangement
- The credit provider in an arrangement where they have provided goods on credit.
- The lessor in a lease arrangement.
- The consignor in an arrangement where they have provided goods to sell on a commercial consignment basis.
Why should you register?
If you have a security interest, registering it on the PPSR is optional but it’s an important way to help protect yourself. If you don't register on the PPSR you risk losing your goods or being left out-of-pocket.
It gives you more legal protection
A written agreement may not be enough to protect you, no matter its terms and conditions. To get more complete protection, you may need to register your security interest on the PPSR, not just state it in a contract.
It helps you get your goods back and gives you priority
If you don’t register on the PPSR and your customer goes insolvent, (or can't pay their debts), before they have fully paid you, the property will be lost and the insolvency practitioner may sell your goods for the benefit of all creditors.
If you don’t register, anyone else who has registered a security interest on the PPSR could be ahead of you in the queue to get their goods or money back if your customer goes insolvent. This is because you will likely be an unsecured creditor, and generally secured creditors are paid first.
To understand more about priority see Which security interest has priority?
It means the insolvency practitioner can find you
The insolvency practitioner will search the PPSR to find the secured creditors. If you’ve registered a security interest on the PPSR, the insolvency practitioner will be able to include you on the priority list for repayment. So it’s important to keep your contact details up to date on the registration.
What is personal property?
Personal property includes almost everything that isn’t land, buildings or fixtures. Things you can register security interests over include:
vehicles, boats and aircraft
crops and livestock
stock in trade
new or second-hand goods
patents and copyright
debts and bank accounts and
shares, cash and cheques.
What can’t you register on the PPSR?
You can’t use the PPSR to register ownership in property or any interest that isn't a security interest. Just because you are owed payment for something doesn’t mean you can register on the PPSR – there needs to be a valid agreement that creates a security interest.
Some personal property is not allowed to be registered on the PPSR, even if you have a security interest in it. This includes:
- land, buildings or fixtures
- water rights and
- government-issued licences such as taxi licenses.
If you misuse the PPSR by trying to register your ownership of something or you register when you don’t have a security interest, you may be breaching the law and penalties can apply.
When to register
You should register on the PPSR as soon as possible. Generally, the earlier you register the higher you’ll be on the list of secured creditors to repay if your customer can't pay their debts.
There are also rules in place about the time frames you must register in to ensure you protect yourself and gain additional rights.
See When you need to register for more information.
You can register as soon as you know you have or probably will have a security interest over a customer. This may be because you switch over to a security agreement with an existing customer.
Don’t wait until you hand over any goods to the customer.
Your protection starts from the time of registration.
PPSR case studies
A case study about how a developer uses the PPSR when they engage a contractor to build a warehouse. Find out about priority rights and commingling of goods when using the PPSR and how it can help protect your business.
A case study about a PPSR security interest being registered against an excavator during a financing deal.