The Personal Property Securities Act 2009 (Cth) (Act) defines a ‘security interest’ as an interest in personal property provided for by a transaction that secures payment or performance of an obligation. A common example is where an agreement between a party lending money (Secured Party) to another party (Borrower) provides that a specific asset, such as a motor vehicle, will be provided as security to ensure payment.

Where a Secured Party holds a security interest that meets the requirements of the Act, it can register that interest on the PPSR. Registration puts others on notice of the security interest and enhances the protection to the secured party in the event the other party defaults on its obligations or becomes insolvent. Failure to register (or otherwise ‘perfect’) a security interest exposes the Secured Party to the risk that the security interest may be defeated by a subsequent perfected security interest or may become unenforceable in the event of the insolvency of the other party.

The expiration date of a registered security interest is dependent on the type of collateral that has been secured. In the case of collateral that is consumer property, meaning personal property held by an individual, or property described by a serial number, such as a motor vehicle, a PPSR registration will expire on the day that is 7 years after the registration date.

For all collateral that is not ‘consumer property’ or property described by a serial number, a secured party can register its interest for a 7 year period, up to 25 years or an indefinite period. The Secured Party initially elects the period of the registration at the time of lodging, but may subsequently extend it.

As the PPSR commenced operation on 30 January 2012, the end of January 2019 marked 7 years since security interests could first be registered. Consequently, now, for the first time, it is possible that registrations can expire.

If a registration expires, it cannot simply be renewed. Instead the security interest will need to be registered again as a new registration. This new registration will not carry the same priority as the initial security interest, potentially allowing for other security interests to take priority. As the PPSR works on a ‘first in best dressed’ basis, where generally earlier registrations take precedence over later registrations, the order of priority can have significant consequences on the Secured Party’s ability to enforce its security.

Further, if a Secured Party’s registration expires and it is required to re-register its security interest, should the Borrower enter liquidation within 6 months of that re-registration, the secured property may vest in the Borrower rather than remain the property of the Secured Party.

In short, there are significant adverse consequences of allowing the registration of a ‘current’ registered security interest to expire.

We encourage all holders of PPSR registrations to keep records of and monitor the expiry dates of their registered security interests. If you are unsure when your registrations are due to expire, you can check the PPSR website to obtain a free report detailing the expiration dates.

If your registrations are close to expiration, and you wish to maintain them, you need to renew them online to ensure the continuity of your registered security interest.

Our Corporate and Commercial team regularly advise clients on the implications of registering security interests on the PPSR, or the failure to do so, as well as assisting to make and manage registrations. If you require any assistance or further advice, please get in touch.

This article was co-written by Commercial Litigation Lawyer, Scott Homan.

This article is not legal advice.  It is intended to provide commentary and general information only.  Access to this article does not entitle you to rely on it as legal advice.  You should obtain formal legal advice specific to your own situation.