The Personal Property Securities Amendment (PPS Leases) Bill 2017 ("PPS Leases Bill") was introduced to the Commonwealth Parliament on 1 March 2017. It addresses some of the concerns that were highlighted in the final report on the statutory review of the Personal Property Securities Act 2009 (Cth) ("PPSA").
What you need to know
- The Australian Government has introduced a bill to amend the PPSA to reduce the number of arrangements that qualify as "PPS leases".
- The main threshold period for a lease or bailment to qualify as a PPS lease will be increased from one year to two years.
- Leases or bailments for an indefinite period will no longer be PPS leases, unless they actually run for a period of more than two years.
- It is not clear when the larger scale reforms recommended by the Whittaker report in relation to the statutory review of the PPSA will be implemented.
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Background
The final report on the statutory review of the PPSA prepared by Ashurst's Bruce Whittaker was tabled in the Commonwealth Parliament on 21 March 2015. The report was the product of extensive consultations with a wide range of stakeholders and contained almost 400 recommendations for ways to improve the PPSA and the PPSA register.
One of the most challenging issues considered in the report was the way that the PPSA applies to leases. This was a source of particular concern for the short-term hiring industry. Some of those concerns were addressed when the definition of PPS lease was amended in 2015 so that it no longer captures leases or bailments of serial numbered good for a period of 90 days or more.
The PPS Leases Bill is a further step aimed at addressing some of the concerns in relation to PPS leases that were highlighted in the Whittaker report as a result, it would seem, of continuing pressure from the short-term hiring industry.
What is changing?
Currently, a lease or bailment of goods is likely to be a PPS lease if it has a term of more than one year, or is for an indefinite period. The interest of a lessor or bailor under a PPS lease will be a security interest under the PPSA, and will need to be perfected to protect the interest of the lessor or bailor in the relevant goods.
The PPS Leases Bill, if passed, will amend the definition of a PPS lease in section 13 of the PPSA so that:
- the primary threshold term for leases and bailments to be PPS leases is increased from one year to two years; and
- leases for an indefinite period of time will no longer be deemed to be PPS leases unless they run for a period exceeding two years.
These amendments should result in significantly fewer leasing and bailment arrangements falling within the ambit of the Act.
The amendments proposed by the PPS Leases Bill will only apply in relation to leases and bailments that are entered into after the day the Act receives Royal Assent.
What to expect next
The PPS Leases Bill will now go through the customary legislative process, and we will continue to monitor its progress. It is effectively the first step towards addressing the concerns in relation to the PPSA that were highlighted in the Whittaker report, and we hope that more comprehensive amendments to the PPSA will follow in due course.
Please feel free to get in touch with any of our Key Contacts listed at the bottom of the page if you have any queries in relation to the PPS Leases Bill.
Authors: Bruce Whittaker, Senior Consultant; Paul Richter, Senior Expertise Lawyer.
