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Personal Property Securities Amendment (PPS Leases) Bill 2017 introduced to ease burden on short-term hire and rental businesses - 3 March 2017

On 1 March 2017, the Personal Property Securities Amendment (PPS Leases) Bill 2017 was tabled in the House of Representatives. The Bill addresses in part the concerns raised by the Review of the Personal Property Securities Act 2009 (Whittaker Review) in relation to “PPS leases”. 

The Personal Property Securities Act 2009 (Cth) (PPSA) provides for holders of security interests in personal property to register those interests to protect them. This applies not only to interests which in substance secure performance of an obligation, but also to “deemed” security interests including PPS leases.

Currently, a PPS lease includes (with some exceptions) any lease or bailment of personal property for an indefinite term or a term of more than one year. This captures many arrangements in the equipment hire industry, where businesses often hire out equipment for an “indefinite” term even though in effect many of these leases will typically be terminated in a matter of days or weeks. As it stands, those leases must be registered, otherwise the lessor risks losing its rights in the equipment if the lessee becomes insolvent.

This has placed significant burden and risk on businesses in the equipment hire industry, particularly small to medium enterprises, many of whom voiced criticism of the current arrangements in submissions for the Whittaker Review. The Bill does not directly reflect the recommendations of the Whittaker Review, but adopts a similar approach in restricting the definition of a PPS lease.

If passed, the effect of the Bill will be to amend the PPSA such that:

  • a lease or bailment for a defined term will only be a PPS lease if its term (including any options) exceeds two years (currently one); and
  • a lease or bailment for an “indefinite term” will not become a PPS lease unless and until the lessor or bailor retains uninterrupted (or substantially uninterrupted) possession of the leased or bailed property for more than two years.

By increasing the relevant term from one to two years and excluding “indefinite” arrangements which terminate within two years, the amendments would prevent short-term hire arrangements from being caught by the PPSA regime, and would significantly reduce the administrative burden and risk for businesses in the equipment hire industry.

For further information, please contact HopgoodGanim Lawyers’ Banking and Finance team.


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