What are purchase money security interests?

A purchase money security interest (PMSI) is a security interest in collateral created by a seller who secures the obligation to pay the purchase price (such as a retention of title agreement) or by a person who finances or provides the value to purchase the collateral. A PMSI could also be the interest of a lessor or bailor under a PPS lease or the interest of a consignor who delivers property under a commercial consignment. (section 14 PPS Act)

The significance of a PMSI is that perfected PMSI’s have “super priority” over general security over after acquired property. (section 62 PPS Act)

A PMSI interest is only granted to the extent that it secures the purchase money collateral.

Registration on the PPS Register is the only method by which PMSI super-priority in inventory can be gained.

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