The definition of what constitutes a lease under the PPSA is wide and if you get it wrong by failing to register a lease which should be registered on the Personal Property Securities Register (PPSR), it can be an expensive mistake.

When it comes to the Personal Property Securities Register (PPSR), we can't help but ask: "It's been six years – what have we learnt?"

To address this, Madgwicks is publishing an informative series of articles over the next few weeks for those of you currently using the PPSR and those who may need to register the occasional dealing. The aim of these 6 articles is to help you better understand how the Personal Property Securities Act (PPSA) applies to you and to avoid the common pitfalls in registration.

In brief

Don’t think you need to register your lease under the Personal Property Securities Act (PPSA)? Think again! The definition of what constitutes a lease under the PPSA is wide and if you get it wrong by failing to register a lease which should be registered on the Personal Property Securities Register (PPSR), it can be an expensive mistake.

What you need to know

  •   Short term leases (less than 2 years) do not need to be registered on the PPSR.
  • Finance leases and hire purchase agreements should be registered on the PPSR.
  • If you are unsure whether to register the lease on the PPSR you should err on the side of caution and register.

What leases need to be registered?

  All leases which:

  1. Have a term of over 2 years; or
  2. Are for an indefinite period and in the possession of the bailee for over 2 years;

are required to be registered on the PPSR.

The requirement to register is so that a third party, such as a buyer or potential lender can see the true owner, and not mistake the bailee as owner of the goods.

What leases do not need to be registered?

  Leases that do not need to be registered:

  • Pre – 20 May 2017 – those leases for a total length of less than 1 year.
  • Post – 20 May 2017 – those leases for a total length of less than 2 years.
  • If the bailee does not provide value for the lease. The value is usually payment.
  • If there is a pooling arrangement – this is where the equipment is passed between multiple users before being passed back to the owner. Once again, this requires a careful consideration of the facts before deciding whether this applies to your lease.

If you are not regularly engaged in the business of leasing or bailing goods, determining whether your lease needs to be registered can be a difficult question.

We refer you to the lessons in Catherine Ballantyne’s article which examines a $44 million mistake where they got it wrong in Forge Group Power Pty Limited (in Liquidation)(receivers and managers appointed) v General Electric International Inc [2016] NSWSC 52.

What is the golden rule?

When in doubt register!

If you are unsure whether to register the lease on the PPSR you should err on the side of caution and register.

We also recommend seeking legal advice to ensure that any registration is valid and enforceable.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.