Reading time: 4 minutes

The New Zealand government legislated the Personal Property Securities Act 1999 (PPSA) to govern the process by which commercial parties enter into security interest arrangements. The PPSA has sections covering all matters of security interest, including priority rules and registration requirements. The PPSA also created the PPSA Register, a database of all registered security interests in New Zealand. This article will explain the five key features of the PPSA. 

What Is The PPSA?


The PPSA is an important piece of legislation that businesses should be aware of. If you are a business that deals with suppliers and other commercial entities, then you will be familiar with security interests. A security interest is a legal right y
ou can grant to somebody in exchange for the performance of an obligation. For example, security interests are generally granted where there has not been payment for goods. Therefore, the person selling the goods has a legal right if the person does not uphold the rest of their payment obligations.

Registration System

One of the most important features of the PPSA is the registration system. The registration system allows businesses to register their security interests on a central database called the PPSA Register. This means that all parties to an arrangement can see who has a security interest with who.

The PPSA registration system is essential when it comes to priority rules.

Priority Rules

The PPSA has priority rules to determine who gets what if there is a dispute over a particular good. The general rule is that whoever registers their security interest first has the best priority. A person who registers their security interest will always have priority over someone that does not register their interest. 

Purchase Money Security Interest

A purchase money security interest (PMSI) is a type of security interest that has the best priority over a particular good. This occurs when the buyer has not paid for the goods but possess the good. The seller retains the title of the goods until the buyer pays.

A PMSI can only exist if they register the financing statement within ten working days of the buyer gaining possession of the goods.

Leases

One of the most important features of the PPSA is that it can apply to leases. This means that when you lease goods to another party, you should register them on the PPSA. However, you should only do this if the lease is for either an indefinite period or for a term of more than one year. Registering a lease on the PPSA register protects your goods when you are leasing them out. This is because the bank can take goods you have leased out if the lessee goes bankrupt. The title of the goods is irrelevant as your lessee has possession of your goods. Registering your lease will mean that you can get your goods back if your lessee goes under. 

Retention of Title Clauses

Supplier agreements might include retention of title clauses. A retention of title clause is used in contracts so that a seller retains title over the good until the buyer has paid it off. This means that you can take back the goods if your buyer does not pay you for the full amount of the goods. However, a retention of title clause is not helpful under the PPSA unless they are registered. This is because a third party who has a registered security interest over a buyer will have first priority over the buyer’s goods if they were to go into insolvency. 

Key Takeaways

The Personal Property Securities Act 1999 is designed to protect those who have security interests over certain goods. It creates a database so that members of the public can see who has a security interest over what. Registered security interests have higher priority over goods, and these are called perfected security interests. A person can also register a purchase money security interest, and this has priority over anything else. Another feature of the PPSA is that leases can be registered if they are for a term of more than one year.

For legal assistance with the PPSA, contact LegalVision’s New Zealand corporate lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Can anyone register their security interest on the PPSA Register?

Yes, both businesses and individuals can perfect their security interests by perfecting them on the PPSA register.

Do retention of title clauses still work if they are not registered on the PPSA?

Yes, but only if nobody else has a higher priority over the goods. If someone has a perfected security interest over the goods in question then they will have higher priority.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

Our Awards

  • 2019 Top 25 Startups - LinkedIn
  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards