Security Interests

Anyone dealing with personal property commercially should be aware of the following. Property can be something you can see and touch or it could be something intangible, like a debt.

If the property is used to support the performance of an obligation it is a security interest. An example of a security interest is where the seller of goods tries to retain the right to the property until such time as the buyer pays for the goods. As this claim is a security interest if it is not registered in time as a charge under the online personal property register (PPSR) the seller will lose out to a prior interest such as a bank or someone who has got their charge registered first.

Luckily, for unpaid sellers, if they structure their terms and conditions correctly, and register the PPSR in time, they can get a super priority over all other competitors.

That example is clear because the seller’s claim against the property is obviously a security. Other situations give rise to deemed security interests.

As they are not obvious, you can lose out to a competing claim if you don’t register a PPSR charge in time. Examples include goods on consignment, leases for more than one year, assignment of debts and various hire or sales agreements.

On the other hand, some transactions that would be security interests are excluded. The practical point is that any time personal property is dealt with in a business there is a good chance that it is a security interest. Your interest is at risk if it is not properly protected by a PPSR charge.