Equipment Rental including Lease, Hire & Bailment (PPSA)

The PPSA has changed forever the idea of ‘ownership’.  It’s now all about ‘possession’ and now, if someone in possession of your equipment becomes insolvent you can lose your equipment.  Possession is now, more than ever, “9/10ths of the law”.

Remember, the PPSA is all about security; if you have security you better register it on the PPS Register if you ever want to use it on the insolvency of your customer.

But what’s the PPSA got to do with the equipment you hire/rent/lease or lend to your customers?  You own the equipment so what’s the issue?

Well, in some situations, the PPSA deems you have a ‘security interest’ in your equipment, so, are you registering it?  And if not, what happens on the insolvency of a customer when they are in possession of your equipment?

You have to see this in action to truly understand it.

  • Ozzie Forklifts hires a forklift to its customer, Rogue Transport.
  • The hire meets the definition of a ‘PPS Lease’.
  • Ozzie is now deemed to have a security interest in its forklift.
  • The PPSA requires all security interests to be registered on the PPS Register.
  • Ozzie hasn’t bothered to comply with the PPSA.
  • Rogue Transport collapses.
  • Because Ozzie hasn’t registered its security interest on the PPS Register it losses its security AND it loses its equipment. The forklift simply becomes the property of Rogue Transport.

 Sounds incredible but hundreds of millions of dollars of equipment has been lost since the introduction of the PPSA and continues to be lost because equipment owners are failing to comply with the PPSA and register their security in their own equipment.

The answer is simple, comply with the PPSA and register your security.

Simply, if Ozzie Forklifts had registered its security in the forklift it would not have lost it on Rogue Transport’s collapse.  One, $6 registration against Rogue would have protected Ozzie for 7 years of ongoing hires between them.

So, when is your hire/lease or bailment a PPS Lease?  This area of the law has been amended several times and is NOT as clear as many would have you believe.

Generally, a lease/hire or bailment of equipment for a term of less than 2 years MAY not be a PPS Lease and accordingly, the PPSA won’t apply.

But (and there’s always a ‘but’) it’s not this simple and there are traps for the unwary.  For example, if you provide equipment to a business who will on-hire or cross-hire your equipment you can be exposed.  Or, if your agreement allows for the ‘rolling’ of the hire term, you may be exposed.  But why take the chance, your equipment is too valuable to risk for such a low compliance cost.

Our Introductory Services will review your business operations, your trading terms and we will advise whether the PPSA will apply to your equipment rental/hire or bailment.

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Be prepared for an uncertain economy

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Trying to recover your debt and/or equipment after your client becomes insolvent is too late. Tighten your security to protect future payments and/or hired equipment.

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