Clifford Gouldson Lawyers

Equipment Hirers Must Read: Significant Changes to the PPSA

Print Version

21/05/2014

Proposed changes to the Personal Property Securities Act (PPSA) could mean real cost and time savings for businesses involved in the equipment hire business.
 
The Personal Property Securities Amendment (Deregulatory Measures) Bill 2014 (the Bill) has recently been introduced into Parliament in an effort to simplify the requirements imposed on businesses who hire serial numbered equipment. The Bill proposes to significantly amend the Personal Property Securities Act 2009 (the Act) so that leases of serial numbered equipment for 90 days or more will no longer be deemed to be PPS leases for the purpose of the Act.
 
What do these changes mean for businesses hiring equipment?
 
If these changes are passed by Parliament, it will mean that businesses will no longer need to register equipment hires for terms of less than 12 months (regardless of whether the equipment is or is not serial-numbered equipment). The Bill is not expected to face opposition in Parliament and it is likely that these changes will take effect in July this year.
 
Critical matters to note
 
Although the amendments will significantly reduce costs and the administrative burden for hire businesses, it is critical to note the following:

  1. the changes will not remove the part of the definition of ‘PPS lease’ that deems a hire for an ‘indefinite’ term to be a security interest. This means that it is more important than ever for hire businesses to ensure that their Hire Agreements and other documentation do not allow for the hire to be extended unilaterally by the customer (eg. the hire term should not be for ‘as long as the customer requires the equipment’ or ‘until the equipment is returned to the hirer’), unless the documentation creates a ‘default maximum’ term. For example, if the documentation provides that if equipment is hired on this basis, businesses need to ensure that they continue to register their security interests on the Personal Property Securities Register; and 
  2. the changes will not have any retrospective effect. This means that businesses must continue to register their security interests in hires of serial-numbered equipment exceeding 90 days until the amendments become law.

Change to the definition of ‘motor vehicle’

 
In addition to the major amendment above, the Bill also proposes a change to narrow the scope of the definition of ‘motor vehicle’. If the proposed change is passed, in order to be deemed a ‘motor vehicle’ for the purposes of the Act, the item will need to be capable of travelling at a speed of at least 10km/hour and have one or more motors with a total power greater than 200 watts. This will reduce the number of items which fall within the definition and subsequently will reduce the scope of the application of the registration provisions of the Act.
 
More changes ahead…
 
The Government has recently appointed a commercial lawyer, Mr Bruce Whittaker to undertake a comprehensive review of the Act, which is due for completion by 30 January 2015. Following the review, it is likely that there will be considerable amendments to the Act.
 
If you require advice regarding whether your hire documentation sufficiently protects you from having to register your security interests, please contact our Business Services Team to obtain further advice.

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