Consumer Rental Agreements under the PPSA

Owners of businesses involved in consumer leases or consumer rentals need to understand the effect of the PPS Act, and to take appropriate steps to protect their interests. It is vital to ensure that consumer rental agreements under the PPSA are properly drafted.

What is effect of the PPS Act (or PPSA) on your business?

If the owners of goods has not registered their interest under the PPS Act then they can have a lower status than the person in possession or control of goods.

Owners need register your security interest to protect your rights. If they do not, then they may not be able to get their goods back or receive payment if the third party becomes bankrupt. They may also lose their rights to another creditor of the third party who has registered a security interest over the property. The requirements for ensuring that their security interest ranks above another person’s security interest in the same property can be complex and may vary depending on the particular circumstances. They should you seek legal advice about the implications of the PPS Act to your individual circumstances.

Deemed Security Interest

The PPSA states that the interest of a lessor of goods under a PPS lease is a Deemed Security Interest.

A “PPS lease” includes a lease of goods-

  • for a term of more than one year;
  • for an indefinite term (even if the lease can be ended within a year of entering into the lease);
  • for goods that or bailment is:

It also includes a lease of goods where the goods may or must be described by serial number in accordance with the PPS Regulations, if the lease  is-

  • for a term of 90 days or more;
  • for a term of less than 90 days, but that is automatically renewable, or that is renewable at the option of one of the parties, for one or more terms if the total of all the terms might be 90 days or more; or
  • for a term of less than 90 days, in a case in which the lessee, with the consent of the lessor, retains uninterrupted (or substantially uninterrupted) possession of the leased property for a period of 90 days or more after the day the lessee first acquired possession of the property (but not until the lessee’s possession extends for 90 days or more).

A PPS lease does not include—

  • a lease by a lessor who is not regularly engaged in the business of leasing goods;
  • a lease of consumer property as part of a lease of land where the use of the property is incidental to the use and enjoyment of the land; or
  • a lease of personal property prescribed by the PPS Regulations for the purposes of the definition of PPS lease, regardless of the length of the term of the lease or bailment.

The takeaway is this: If you are in the business of leasing or renting goods, you should ensure that your agreements are drafted with the PPS Act in mind, and that you register your interest.

Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>