Personal Property Securities Act Changes

Monday, November 20, 2017

Changes under the personal property securities regime that came into effect on 20 May 2017 significantly amend the definition of a Personal Property Securities Lease (“PPS Lease”).

The Personal Property Securities Act 2009 (Cth) (“PPSA”) provides that the security interests (including PPS Lease) not perfected by registration or otherwise may be exposed to adverse consequences if the lessor becomes insolvent and there are competing or other security interests in the goods in question.

What Are the Reasons for the Changes?

The reasons for the changes were (as explained by the Minister for Justice), in summary:

  1. Businesses sometimes lease goods for a short period of time and permit customers to then continue using those goods as long as the goods are needed (for example, chainsaws, cement mixers etc.).
  2. Under the old regime, businesses had to insist on fixed terms for the lease of a chainsaw or cement mixer in order to protect their interest in the goods.
  3. If the customer needs the goods for an extra day or a week, the lessor needs the flexibility to accommodate this without an onerous administrative burden.
What Are the Changes?

The Personal Properties Securities Amendment (PPS Leases) Act 2017 (“amending Act”), changes the definition of “PPS lease” in section 13(1) of the PPSA.

The new definition states that a PPS Lease means a lease or bailment of goods, if the lessor is regularly engaged in the business of leasing goods:

  1. For a term of more than two years (rather than the previous one year) – will be a PPS lease from day one.
  2. For a term of up to two years (rather than the previous one year) that is automatically renewable, or renewable at the option of one of the parties, for one or more terms that might exceed two years – will be a PPS lease from day one.
  3. For an indefinite term – will be a PPS lease if the lessee retains uninterrupted (or substantially uninterrupted) possession for more than two years (but not until the lessee’s possession extends for more than two years) [previously, leases for an indefinite term were PPS leases from day one].
  4. A lease for a term of up to two years (rather than the previous one year) – will be a PPS lease, if the lessor retains uninterrupted (or substantially uninterrupted) possession of the leased goods for a period of more than two years after the day the lessee first acquired possession (but not until the lessee’s possession extends for more than two years).
Do the Changes Affect Existing Leases?

The amendments are not intended to apply to leases of goods which would have been PPS Leases prior to the commencement of the amending Act.

However, the changes to the definition of PPS Lease appear to apply to lease, rental and hire arrangements entered into after the commencement of the changes (May 2017), even if those arrangements incorporate the terms of a contract entered into before the commencement of these changes.

How We Can Help

In order to avoid losing rights to your own goods, it is recommended that you contact Quinn & Scattini Lawyers to discuss the process of registration and to obtain clear legal advice regarding your rights and responsibilities under the PPSA, and to ensure that all documentation is kept up to date.

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