Personal property security register
CONSTRUCTION INDUSTRY UPDATE
The introduction of the Personal Property Securities Act 2009 (PPSA) was to streamline the registration of securities over personal property.
The Personal Property Security Register (PPSR) is a national, electronic register of security interests in personal property that was established on 30 January 2012.
How does the PPSR affect me?
If you have an interest over any personal property, you need to register that interest on the PPSR in order to ensure that you have priority over any other claim.
Whilst the operation of the PPSR is by no means limited to the construction industry, there are a number of industry specific situations that can arise.
Taking proactive steps to avoid any potential loss of interest is an important step in any construction project.
Construction industry specific effects of the PPSR?
If you are involved in a construction project that involves parting with possession of personal property (for example, scaffolding, formwork, plant and other equipment), you would be wise to consider registering your interest in that property as a matter of urgency on the PPSR before you part with possession of it.
Failing to register your interest on the PPSR could result in that interest being defeated at some later date, if the party with possession, (such as the owner of the site or the head contractor) grants a security interest in your goods or goes into liquidation …in which case the Liquidator may have a better interest than you!
Temporary works
Temporary works such as formwork and scaffolding that are removed at the end of a project are one example of personal property over which an interest should be registered on the PPSR.
Prior to the introduction of the PPSR, a contractor would simply rely on their legal ownership to protect their interest and remove these items at the end of a project. Now, if you fail to register your interest in these or other temporary work items, you may be in for a nasty shock at the end of a project if the party in possession (such as the head contractor or site owner) has passed title onto another purchaser.
If that occurs and the purchaser registers their interest on the PPSR then you may find your interest in those goods is defeated by the purchaser’s claim.
Retention of title
If you contract using a supply contract that includes a clause providing that title to goods will not pass to the purchaser until full payment has been received, then pursuant to the operation of the PPSA that clause is likely to mean that a security interest in favour of you as the supplier, arises.
Your interest will need to be registered on the PPSR if it is to be enforced against third parties.
Leasing equipment
If you own and lease goods and equipment for use on building sites, you may be surprised to learn that legal ownership of the equipment may not be sufficient to protect your interest.
Under the operation of the PPSA, the lease may be considered to be a PPS Lease and your interest in any goods or equipment covered by the lease will be deemed to be a security interest.
A failure to register your interest on the PPSR could result in you losing ownership if another party uses those goods or equipment as security for another loan.
Principal’s rights on take out
It is not uncommon in construction contracts for the Principal to be given the right to take over a contractor’s construction plant and works in the event that the contractor defaults on their portion of the construction contract.
The Principal’s right to act in this way is likely to be considered a security interest under the PPSA. If you are a Principal you must register your interest on the PPSR in order to ensure that you have priority over any other possible competing interests.
How can the PPSR help me on my construction projects?
As well as providing a national central register where you can record any interests you have in goods (including plant or equipment), or in the case of Principals, any rights to take out, the PPSR also provides a useful resource for checking whether goods you may be thinking about purchasing or accepting as collateral, are already encumbered with a debt or charge.
This is particularly relevant if you are thinking of purchasing construction specific goods )such as plant equipment including formwork or scaffolding) that are currently located on a construction site. Check the PPSR to ensure that there is no prior interest registered in these goods prior to purchase.
The PPSR is also an excellent risk protection tool.
If you find yourself on the other side of the table and are trying to raise funds for your business using your interest in plant equipment (including scaffolding and formwork) as collateral for any loan, you may find that you are able to raise finance more easily because potential purchasers are able to check on the PPSR to confirm that the goods you are offering as collateral are not subject to a pre-existing loan arrangement.
A properly registered interest on the PPSR can mean that you are the first party in line to get your goods back if a party in possession attempts to raise funds using your plant equipment as collateral. This is a far preferable position to being at the end of what may be a very long queue of an insolvency process if your customer goes belly up owing you and many others money.
Ensuring that registrations on the PPSR are correct and complete is also important. Our experienced lawyers can advise and assist you on all aspects of the operation of the PPSR and particularly how it can assist those working in the construction industry.
