There’s the old saying that “possession is nine-tenths of the law”.
But, if there’s one piece of legislation that sets that concept on its ear, it’s the Personal Property Security Act (PPSA) – unfortunately, though, many businesses that supply and lease goods on hock still aren’t using this helpful credit control tool.
What suppliers and lessors must understand is that their ownership rights over goods, for which they’re still owed money, are by no means cut and dried. Under the law, it’s possible to repossess goods and have them safely tucked back at your premises – but then have to watch another creditor legally walk away with what you thought was your reclaimed property.
Granted, there are a few procedures and systems businesses must get their heads around to secure their interests, but countless businesses have found it’s time and effort very well spent.
Essentially, the PPSA gave us the PPSR – the Personal Property Security Register, an online database, which holds information on who owes who money for goods, and who can lay claim to what property should the debtor default. As of October 1, the register will have a brand new website which makes it even easier to search.
To safeguard ownership of goods bought on credit until the debt is cleared, businesses must formally register their security interest over the property on this database. It costs only $16.10, but it’s an investment that, for many, has already returned thousands upon thousands of dollars that would otherwise have been lost to another creditor.
It’s not just about registering, though; it’s about registering properly, because a “pecking order” situation can arise. Banks, for example, can place a security interest over everything a debtor “owns” – including the goods you have leased or sold on credit.
There is scope to nudge ahead in the queue, though, by registering a purchase money security interest (PMSI) – which is afforded “super priority” – within 10 days of supply.
The all-important glue to ensure you not only have the right protective measures in place, but can actually use them, are well drawn-up terms of trade.
For your registration to stick legally, your terms of trade must be in order and include a clear notification to the buyer or lessor that you intend lodging your interest on the PPSR.
If you’re in the business of selling on credit or leasing goods and you’re either not using the PPSR, have concerns you mightn’t be using it to its full effect, or your terms of trade aren’t quite as watertight as they could be, please feel free to get in touch.
Feedback, comments and questions are always welcomed – please feel free to e-mail me on janice@aspiringlaw.co.nz.
Janice Hughes: Phone 03 443 0900.
