Plant Hire businesses and the Personal Property Securities ActGeneral News: 15/08/2017
Do you ever lease or contract your equipment to a third party? Did you know if the party you’ve provided these to goes into liquidation, you could lose your asset regardless of your ownership?
Read this article for further information on PPS Leases and recent changes to the law.
How does the PPSA deal with leasing arrangements
The PPSA previously provided that any lease or hire arrangements for goods which is for a term longer than one year or for an indefinite term, was considered a PPS Lease. All PPS Leases are required to be registered on the online register to ensure that the owner of the goods retains ownership whilst the leasing party has possession of the goods.
How does the PPSA deal with leases of goods
Previously, any lease of goods which was for an indefinite term or for a term of more than 1 year was considered a PPS Lease.
PPS Leases are required to be registered on the online PPS Register. This is an important safeguard for the owner of the goods to alert everyone that although someone else is in possession of the goods, there is a hire arrangement in place and the owner still retains ownership of the goods. Otherwise, the owner risks losing ownership of the goods.
For example, if a plant hire company leased an excavator to a construction company for an indefinite term and the construction company went into liquidation whilst in possession of the excavator, the plant hire company could not retrieve the excavator unless they had a registration showing the still owned the excavator on the PPS Register. The excavator would fall into the hands of the liquidator of the construction company and the plant hire company would have no way to recoup the item or any funds.
What are the recent changes?
On 20 May 2017, the definition of a lease under the PPSA was varied, significantly reducing the burden on hire businesses to register their interests in each hire arrangement.
The duration of a lease which is considered a PPS Lease has been extended from 1 year to 2 years. Leases with an indefinite term will no longer be deemed to be a PPS Lease until they run for a period of more than 2 years.
This reduces the burden on businesses hiring goods for an indefinite period.
Please remember however that there remains a strict timeframe for registration and that best practice is that the registration should be completed before the goods are handed over. In the case of goods leased for an indefinite term, hirers should be wary of the 2 year timeframe as a registration should be completed toward the end of the 2 year timeframe.
If you engage in any hire of goods and need advice as to protecting your ownership of these items, please contact Mulcahy & Co Legal.