Litig8: Relief and reprieve for short term hire businesses

March, 2016

By Nirupa Manoharan, Senior Associate

Each month as a part of Mills Oakley’s Litig8, we bring to you snapshots of eight key cases, legislative changes or other legal events. The summaries are not comprehensive and do not constitute legal advice. You should seek professional advice before taking any action based on the content of this email.

Part 3 of the March edition of Litig8

The Personal Property Securities Act 2009 (PPSA) has created one of the most significant law reforms in recent times.  Its biggest impact on businesses has been in the creation of a nationwide scheme for the registration of security interests over personal property on the ‘Personal Property Securities Register’ (PPSR).

A relatively small amendment to the PPSA on 1 October 2015 is likely to have a large impact on businesses that engage in short term hire or lease arrangements.  The Australian Parliament has passed legislation amending the PPSA to reduce the number of commercial leases and bailments deemed to be ‘PPS leases’ under the PPSA.  From 1 October 2015, commercial leases or bailments of serial numbered goods – which includes motor vehicles, aircraft, watercraft and certain IP rights – will no longer be deemed to be a PPS lease if they have a fixed term of between 90 days and one year. Rather, in order to be deemed a PPS lease those leases must have a fixed term of more than 12 months or an indefinite term.

The effect of this change on businesses that regularly lease or hire serial numbered goods on relatively short terms (i.e. less than 12 months) is immediate.  Specifically, those businesses may no longer need to lodge a registration on the PPSR in order to ensure they can protect and enforce their rights in the leased or hired goods.  The reduction in the administrative burden and compliance costs on businesses is likely to be substantial.

However, a word of caution.  If your business deals with leases which have an indefinite term or if the original term of the lease plus any renewal terms ultimately adds up to over a year or if you are a party to a lease that was entered into prior to 1 October 2015 the registration requirements in the PPSA will very likely still apply to you and you should ensure you adequately protect your interests, including by registration on the PPSR.

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