PPSA - blessed relief for the hire industry is coming
Australia’s hire industry has, for several years now, been seeking relief from the draconian effects of the Personal Property Securities Act 2009 (Cth) (PPSA).
Those efforts finally look set to bear more fruit with the introduction today into Federal Parliament of a Bill to cut down significantly the scope of the ‘PPS lease’. That is the statutory definition that currently deems certain leases (including hires) and bailments to be PPSA ‘security interests’.
The ‘PPS lease’ concept has trapped and damaged numerous hire and leasing businesses who have either been unaware of it, or have not managed to grapple with the complex PPSA registration regime they need to master to protect their ownership. It is likely that the PPSA has cost owners many hundreds of millions of dollars in lost title to leased or hired assets. There are two decided cases about PPS leases (involving the Forge and Onesteel insolvencies) which show losses to owners exceeding $80 million. See our website for more details. Those reported cases are undoubtedly the tip of the unreported PPSA iceberg.
Under the Bill introduced today, the PPSA would be amended so that leases and bailments only fall into the ‘PPS lease’ definition when:
the agreed term of the lease and any options actually exceeds two years; or
the lease actually extends for more than two years.
The two year threshold replaces the current one year term.
Critically, the proposed amendments will also remove leases ‘for an indefinite term’ from the PPS lease definition. A lease for an unspecified term (so common in the hire industry) will now not be caught unless and until it actually lasts more than two years.
We understand the proposed amendments are not contentious and are likely to become law. They will significantly reduce the regulatory impact which the PPSA is having on typical short term hire and rental business, the majority of which is written by small to medium enterprises.
The amendments don’t take the hire industry entirely out of the woods. The PPSA will still catch any lease which is in substance functioning as a security – such as a rent-to-buy or deferred purchase agreement and it will still apply to finance leases written by the finance industry. And some hire agreements have been known to exceed two years. Those would still be caught.
The amendments are not retrospective and would only apply to a lease or bailment of goods entered into after the commencement of the new definition.
The amendments are contained in the Personal Property Securities Amendment (PPS Leases) Bill 2017 which can be found here.
Bartier Perry is pleased to have worked since 2011 with the hire industry as PPSA adviser to its peak bodies, the Hire & Rental Industry Association and Elevating Work Platform Association. If you have any questions, contact our PPSA team.