LawTalk Blog

Will the Personal Property Securities Act impact on distraint for rent?

Does the PPSR impact on distraint for rent

The Personal Property Securities Act 2009 (“the PPSA”) came into force on 30 January 2012 and has significantly changed the way that that Australian law deals with personal property security interests.

Since the commencement of the PPSA any transaction that gives a party an interest in personal property that secures payment or the performance of an obligation is likely to be subject to the Act.

A key change from the position prior to the PPSA is that parties with a security interest in personal property are now required to “perfect” that interest through registration on the Personal Property Securities Register (“PPSR”), which is a searchable register of PPSA security interests.

Failure to “perfect” an interest under the PPSA will leave the owner of that security exposed. For example, if a company which is the grantor of an unperfected (i.e. unregistered on the PPSR) security interest is later wound up due to insolvency the unperfected security interest may vest in the liquidator, leaving the party who failed to perfect that interest unable to enforce its security and in the same position as all other unsecured creditors in regard to the debt owing to him or her by the company.

This would have been avoided if the interest had been registered on the PPSR at the time it was created.

The PPSA and leases

As suggested by the name of the Act, the PPSA relates to personal property and is separate to the law relating to land. It will however, apply to goods that form the subject of a lease; for example, if the lease includes non-fixed fit out items or equipment. It will also relate to goods which may be distrained by a landlord for rent arrears.

In an earlier blog we discussed the right to distrain goods for rent arrears under the Landlord and Tenants Act 1936 (SA).

Whilst the right to distrain can be invaluable for landlords who have commercial tenants that fail to pay rent when due, the introduction of the PPSA has created additional issues for landlords to consider when faced with managing a commercial tenant who is not meeting its financial obligations under a lease.

Under the Landlord and Tenants Act 1936 (“the LTA”) a third party owner of distrained goods (for example under a hire purchase agreement) has a right to release of those goods if a tenant had no legal title to them and the claim for their release is made before the landlord has exercised its power of sale under the LTA.

As a result of the introduction of the PPSA however, it will now be necessary for a landlord to also search the PPSR in regard to any distrained goods to ensure that there are no PPSA interests registered over them before that landlord can sell those goods.

Given the relatively recent introduction of the PPSA it remains to be seen how this will impact upon the distraint for rent in the longer term however at the very least it has created another administrative step that landlords will now need to take before they can look to recover rent that is fairly owing to them.

Please note, this Blog is posted in Adelaide, South Australia by Andersons Solicitors. It relates to South Australian legislation. Andersons Solicitors is a medium sized law firm servicing metropolitan Adelaide and regional South Australia across all areas of law for individuals and businesses.

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