Lessor To Register Interests On PPSR

By Naomi Schulte • In Commercial LawComments Off on Lessor To Register Interests On PPSR

A recent Australian case has confirmed that if a lessor fails to register its interest on the PPSR over plant and equipment that remains at the leased premises, the lessor’s interest in the equipment can pass to the administrator of the lessee.

In the 2016 case of Flown Pty Ltd v Goldrange Pty Ltd, the lessor loaned $460,000 to the lessee to purchase plant and equipment to be used in the lessee’s business at the leased premises.  A Loan Agreement was entered into and this Agreement charged the plant and equipment, however, the lessor did not register its interest on the Personal Property Securities Register (“PPSR”).

The lessee later went into administration and its administrator claimed the plant and equipment on the basis that the lessor’s security interest was unperfected.

PPSA ISSUES

Under section 267 of the Personal Property Securities Act (PPSA), where a security interest over goods, plant and equipment or similar property is unperfected and the grantor, being the lessee in this circumstance, enters into administration, the unperfected security interest vests in the grantor and passes to the administrator.

The secured party, being the lessor in this circumstance, is then only able to attempt to recover the value of the property in the administration as an unsecured creditor.

THE DECISION

The Court decided that the lessee’s administrator successfully retained ownership of plant and equipment in the leased premises.  As the lessor’s interest was unperfected and as the plant and equipment were not fixtures forming part of the land, the items could not be claimed by the lessor to avoid being passed to the administrator.  To perfect the security interest the lessor’s interest in the property should have been registered.

OUR COMMENTS

If a lessor has any interest in fit-out, plant and equipment or other property that remains in the leased premises, its interest must be adequately documented and registered on the PPSR in accordance with the PPSA.

This will prevent the lessor having to engage in legal disputes and costly litigation to try to establish its interest in or possession of the fit-out or plant and equipment.

For further information, contact us on (07) 5597 3336 or email nschulte@belllegal.com.au

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