Retention of title and leasing

Application of the Personal Property Securities Act 2009 (Cth)

The PPS Act is a law about security interests in personal property. Personal property is generally all property other than land, fixtures and certain statutory interests. A 'security interest'[1] is an interest in personal property that in substance secures payment of a debt or other obligation.

This definition incorporates standard forms of security such as mortgages and charges. It also covers some transactions not currently considered traditional security interests, in particular:

  • retention of title clauses in contracts whereby a purchaser has possession of property, however does not acquire title from the vendor until the full purchase price is paid, and
  • operational leases of personal property for a term exceeding 12 months.

Under the PPS Act, retention of title (ROT) suppliers and lessors will become secured parties with a security interest in the collateral, and will have a purchase money security interest (PMSI)[2].This is a certain type of security interest which elevates the interest of the secured party to a higher status relative to other interests.

What are the benefits of PPS reform to retention of title or lease suppliers?

The main benefit to ROT suppliers or lessors under PPS reform is that the PPS Act provides clear rules to be followed in order for ROT suppliers or lessors to protect themselves in the event of a buyer's or lessee's default or insolvency. However in order to maximise this protection the secured party must register their security interest in the property supplied or leased.

Under the PPS Act, ROT suppliers and lessors enjoy the benefit of what is known as PMSI super priority. This means that a registered security interest of a ROT supplier or lessor takes priority over all other, including earlier, security interests in the collateral where the requirements of the PPS Act have been complied with.

A second benefit of a registered ROT or lease-based security interest is the protection it offers against a trustee in bankruptcy or liquidator. Under pre-PPS Act law, some retention of title clauses were ineffective when disputed by a liquidator because the particular form of the transaction, derived from the words used in the clause was decisive. Under the PPS Act, the emphasis is no longer on the particular legal form the transaction takes, but on its substance, i.e. does the clause amount to a security interest? As a result, such a security interest in the property supplied, if registered, means that the property will not be available to a trustee in bankruptcy or a liquidator.

In the case of companies, the Corporations Act 2001 (Cth) has been amended to include the concept of 'PPS Act retention of title property'[3] . This is property which is owned by the secured party but is in possession of the receiver/ lessee of the goods[4] . If such a security interest is not registered on the Personal Property Securities Register (PPSR), it will vest in the company[5]. The effect of this would be that the secured party could not seize the collateral on the liquidation and their only recourse would be to prove the debt against the liquidator and be paid out as an unsecured creditor.

The registration of a lessor's security interest on the PPSR also reduces the potential for innocent third parties to be deceived by the lessee's possession of the property and therefore believe that no other interests exist in it.

In order to give businesses an opportunity to adjust to PPS reform and the need for registration on the PPSR in particular, there was a 24 month transitional period which ended 31 January 2014.

The effect of this transitional period is that ROT suppliers or lessors who entered into agreements before 30 January 2012 that create security interests in the property supplied or leased had two years to register those interests (transitional security interest or TSI). A registration after 31 January 2014 will result in the secured party losing the benefit of the transitional provisions. The PPS Act provided a 24 month transitional period to register pre-existing security interests at no cost. The transitional period ended at the end of January 2014. Normal registration fees apply for transitional registrations as from 1 July 2015. If a security interest loses its 'perfected' status its priority ranking is not preserved.

What this means is that the 'perfected' status of the security interest will only begin from the time of registration on the PPS Register, instead of the earlier date allowable under the transitional provisions if registered before the end of 31 January 2014.

Agreements entered into after 30 January 2012 are not subject to the transitional arrangements.

It is important to note that the PPS Act does not require a registration to be made in respect of all supplies or leases to the same buyer or lessee. A single registration may cover subsequent security interests in property that is supplied under later agreements. However, in all cases registration will be at the choice of the secured party as it is not mandatory.

In light of these potential benefits, businesses should consider reviewing their practices, as well as, consider their exposure and the relative benefits and risks of whether to register on the PPS Register.

For details on the process of registration, see the PPS Register and priorities fact sheet. The PPS Register will be inexpensive and user friendly.

The below table outlines some factors that retention of title suppliers and lessors might consider when deciding whether to register.

The list is not in any particular order and is not exhaustive, and businesses should seek their own professional advice on whether to register.

Considerations for retention of title suppliers and lessors when deciding whether to register


Commercial consideration

Pre-existing client relationship

  • Does the term of supply/lease prohibit the grant of further security interests in the collateral?
  • The history of the supplier-client relationship and degree of trust
  • What pre-lending due-diligence has revealed about the solvency and other details of the goods receiver/lessor
  • Market knowledge and standards of behaviour

Risk profile

  • What is the likelihood that the retention of title supply or lease agreement will be dishonoured?
  • Are transactions of the type being contemplated by the secured party often dishonoured?
  • The numbers and value of dishonoured agreements in the secured party's books

Collateral value

  • The value of the collateral
  • The proportion of the value of the collateral to the total assets of the business

Nature of supply

  • The frequency of supply
  • The value of supplies to a client
  • If multiple supplies to one client, the aggregated value of the multiple supplies

Commerciality of enforcing

  • Costs of enforcement against collateral of that type
  • Practicalities of enforcement: Is the collateral perishable? Is there a market for second hand collateral of that value?
  • The likely depreciated value of the collateral

Cost of transitioning to and adopting PPS practice

  • The cost of developing back office functions, up-skilling staff and transacting with the register.

There is no clear formula to determine whether a given business should register its security interests. All these factors are relevant but none in their own right are determinative.

More detail about retention of title supply and leases is available in the purchase money security interests fact sheet.


  1. Section 12, PPS Act
  2. See information sheet: Purchase money security interests
  3. Section 51F, Corporations Act
  4. Section 51F, Corporations Act
  5. Section 267, PPS Act

PPS transitional Provisions

For more information on the PPS transitional provisions including transitional security interests and migrated registrations please see the 'PPS Transitional Provisions' fact sheet located at

Professional advice recommended

PPS could affect you or your business in a number of different ways. You should seek professional advice in relation to your specific circumstances.

Where can I get further information?

For more information visit the 'Ask the Registrar' page at

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Telephone 130000PPSR (1300 007 777)

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