Are there any proposed amendments to the Personal Property Securities Act 2009?

Following on from several recent court decisions that have seen lessors lose in claims against insolvency practitioners, the Federal Parliament has recently introduced legislation to amend the Personal Property Securities Act 2009.

The Explanatory Memorandum says:

This Bill would amend section 13 of the Personal Property Securities Act 2009 to extend the minimum duration of PPS leases from more than one year, to more than two years. This Bill would also amend the Act to provide that leases of an indefinite term will not be deemed to be PPS leases unless and until they run for a period of more than two years.

This Bill would significantly reduce the regulatory impact which the Act is having on short term hire and rental businesses, the majority of which are small to medium enterprises. The hire and rental sector almost exclusively uses indefinite term leases which usually run for less than a week and rarely exceed a period of two years. Very few hire and rental industry related transactions would be caught by the amended provision due to the increased minimum duration. An amended section 13 of the Act would continue to appropriately capture longer term high value hire and rental industry leases. The amendments would not modify the operation of the Act in relation to leases which are in-substance security interests.

According to the PPSR web site:

If the Bill becomes law, leases (and bailments) entered into after the changes take effect would not be deemed to be security interests under the PPS Act if they are for periods of two years or less, instead of one year or less (including options for renewal etc.).

The Bill also provides that leases of an indefinite term would not be deemed to be PPS Leases until they run for a period of more than two years. This would mean that, should the Bill become law, leases (and bailments) of an indefinite term can be registered towards the end of the two year period instead of having to be registered at the start. Additionally, if a business does not suspect that a lease for an indefinite term—entered into after the proposed changes commence—will last for two years then no registration should be made.

For lessors currently making registrations over PPS Leases—because they lease on terms that meet the current definition but not the one provided in the Bill—if the Bill become law, a registration should not be made as the agreement would no longer be considered a PPS Lease.

What is clear is that businesses which lease goods need to consider the impact of the proposed legislative changes upon the way that they conduct their business.