As anticipated after the Parliamentary review of the Personal Property Securities Act 2009 (PPSA) completed earlier this year, and with the aim of reducing the number of lease transactions that fall within the scope of the PPSA, the Australian Parliament has recently passed legislation amending the PPSA with respect to what is a PPSA lease.

This amendment is aimed to reduce the complexity, time and cost for parties entering into hire or lease arrangements with commercial customers.

The amendment will mean that section 13(1)(e) of the PPSA will be repealed, effective from 1 October 2015. It is important to note that the amendments are not retrospective, so only apply to leases or hire arrangements entered into on or after 1 October 2015.

Before 1 October 2015

Section 13(1)(e) of the PPSA provides that a lease of serial numbered goods (for example motor vehicles) is a lease under the PPSA if it is for a term of 90 days or more, whether that is made up of a single set term, an initial term with options, or is the period that the lessee actually retains possession of the property.

From 1 October 2015

Following 1 October 2015, a lease that is for less than one year (including any option terms) and which is a lease of serial numbered property to a commercial customer, will generally not be a PPSA lease – making registration under the PPSA unnecessary in order to protect an ownership interest. Any lessor should however be able to provide proof of ownership, to avoid any risk of loss.

It should be noted that a lease or hire arrangement for less than one year could still give rise to a security interest and a need for registration, if "in substance" it secures the payment of money or the performance of obligations.

The remainder of section 13 of the PPSA will continue to apply and certain lease transactions will continue to be PPSA leases or give rise to a security interest. Registration of a lessors' interest, either under another section 13 PPSA lease or any other security interest created to secure the payment or performance of an obligation, should be considered and if necessary made to protect the lessor.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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