How does the PPSA impact your business? - NAB

Scenario 2
Lease of non-serial numbered
goods
GSA/PMSI
LessOr (Owner)
BANK
Shop fittings
PMSI
Lessee (business)
Business
A significant change has also occurred in the treatment
of non-serial numbered goods, such as shop fittings,
which are treated differently under PPSA.
As shown here, if an owner leases shop fittings (non
serial numbered goods) to a third party business for a
defined period of 12 months or less, the arrangement is
not considered a registrable PPS lease, and in the event
of the third party business’ insolvency, the liquidator is
not entitled to take title to the shop fittings.
If the lease is for greater than 12 months (or for an
undefined period) and the owner has not registered
their interest in the shop fittings on the PPSR, then the
liquidator (or the holder of a GSA from the third party
business) could possibly deal with the shop fittings as
part of the third party business’ property and sell it up.
If the owner has registered their interest on the PPSR,
then the owner retains title to the shop fittings and
the liquidator cannot take title to the shop fittings.
The owner may register their interest in the shop fittings
as a PMSI on the PPSR, against the third party business,
so they will have priority over most existing security
interests; e.g. the holder of a prior GSA from the third
party business.
Bank
In scenario 2, the bank will consider whether it needs
to register a specific charge over non-serial numbered
goods, such as the shop fittings, or whether it may rely
solely on a General Security Agreement to secure its
interest in the event of its customer (that is, the owner
of the goods) becoming insolvent. The bank may
register a PMSI over specific non-serial numbered goods
if it has provided finance to purchase the goods.
The bank will also need to consider how the PPSA
affects its customer’s title to non-serial numbered goods
that the customer leases to third parties. In scenario 2,
if the customer leases non-serial numbered goods to
the third party business for greater than 12 months (or
an undefined period) without registering the PPS Lease,
the customer could lose title to the goods if the third
party business became insolvent. Obviously, this would
damage the customer’s financial positioning and also
the bank’s security in respect of the goods (even where
the bank itself has properly registered its interest).
It is also important to note that the same PPSR
considerations apply if the customer and the business/
third party are related entities. For example, if the
customer is an asset holding company which leases
goods to a related trading company.
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