PPS changes: leasing and hiring of equipment

The Commonwealth Government has introduced the Personal Property Securities Amendment (Deregulatory Measures) Bill 2014 into the House of Representatives.

If passed, leases of serial numbered goods (eg motor vehicles) of more than 90 days but for less than 12 months will no longer be deemed to be PPS leases for the purposes of the PPS Act. Accordingly PPS leases will consist of leases of a term of more than 12 months or an indefinite term regardless of the type of goods leased.

A lessor is at risk of losing its rights to equipment it leases or lends if the leases are either “PPS leases” or are by way of security and their rights are not registered on the PPSR.

Fixed short term leases (currently less than 90 days for serial numbered goods or less than one year for other goods) do not need to be registered if they are not held as security. But indefinite term leases must be registered.

A PPS lease gives a lessor priority rights against a hirer’s creditors if its lease is registered.

The amendment may also be supplemented by a change to the definition in the Regulations of “motor vehicle”.

The current definition of motor vehicle in the PPS Regulations includes personal property that is built to be propelled, wholly on land, by a motor that forms part of the property and is capable of either a speed of at least 10km/h or has 1 or more motors that have a total power greater than 200W.

By combining the two parts of the definition (ie requiring both speed and power output), fewer items would come within its scope.

The current definition has resulted in packaging machines, scissor lifts, excavating vehicles and stationary cement mixes being classified as motor vehicles for PPS purposes.

Implementation and review
The changes set out in the Bill will only apply to leases entered into after commencement of the amendment.

To allow affected stakeholders time to make any small adjustments necessary to take advantage of the change to the PPS Act, it is proposed that the commencement of this amendment, if passed, would be delayed for a short period (but no more than 6 months). Delayed commencement would also allow changes to the operation of the PPS Register to be made and for Government to develop educational materials to help communicate the changes to stakeholders.

A change to the definition of “motor vehicle” in the PPS Regulations would require a similar delay in the commencement of the amendment.

The amendments would also be expressed to apply to goods leased on or after commencement of the changes. This would preserve the operation of the law in relation to any pre-existing interests created in respect of leases before the commencement of the changes.

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