PPS Leases: Proposed changes to the PPSA

Effect of proposed changes affecting PPS leases

Currently, a lease/bailment that creates a security interest in the leased goods is deemed to be a PPS lease if the lease is for a term of one year or more, or an indefinite period. If enacted, the bill will do two things. Firstly, it will extend the minimum duration of PPS leases from one year to two years, and secondly, it will not deem an indefinite lease to be a PPS lease unless and until it runs for over two years. It is worth noting that the amendments are not intended to apply to leases or bailments of goods which would have been deemed PPS leases before the commencement of the bill.

The bill sounds promising. It aims to reduce the regulatory impact that the current provisions have on short term hire and rental businesses. The rental sector often uses indefinite term leases, which, in reality, usually run for less than one week. If legislated, the bill will only apply to longer term, high value hire and rental industry leases. This means that bailors will not have to register their interest in the leases on the PPSR to protect their goods in the event that the bailee becomes insolvent.

We’ll keep you updated if the bill is passed, and if that happens, bailors will need to keep an eye on registering leases/bailments that are greater than two years. Please contact Peter North or Caroline James if you have any questions about the bill, or about the PPSR in general.