Holding Redlich says…..

When creating a registration in relation to a security interest, an option is given to tick a box stating that “current assets are subject to control”.

The PPS Regulations prescribe that for collateral which is commercial property, the financing statement needs to indicate whether or not the collateral is subject to control for Part 9.5 of the PPSA. Part 9.5 of the PPSA contains special rules relating to fixed and floating charges created prior to the commencement of the PPSA.

If you are not registering a security interest on the PPS Register in relation to a fixed and floating charge created prior to the commencement of PPSA, it would generally be appropriate not to tick this box as the rules in Part 9.5 of the PPSA are likely to be inapplicable.

If you require PPSR information specific to your business requirements, please contact Holding Redlich on the numbers to the right.

Dealer Solutions has made enquiries with PPSR on behalf of our clients regarding reported cases of serial number (VIN) searches returning current security interests when they believe the interests were previously discharged from REVS prior to the commencement of PPSR.

The National PPSR Service Centre has responded to our enquiry and advised that;

“The PPS Register is a noticeboard of security interests. We do not maintain nor manage the registered interests on the system. That is the responsibility of the secured party.”

Based on this response, our advice is that any Security Interest on the PPS Register should be treated as a current interest regardless of information you have that states otherwise.

If you believe that a Secured Party has a Security Interest on the register that is invalid or incorrect, you should contact the Secured Party as shown on the Search Certificate and request for the Security Interest to be amended or removed (Discharged) from the PPS Register.

All existing Dealer Solutions REVS clients have automatic access to PPSR through Dealer Solutions. If you plan to register Security Interests, and you should if you release vehicles without first having received payment in full, we will need to set you up as a ‘Secured Party‘ in the PPSR.

You do not need to create an account with the Govenment, or anyone else, for PPSR if you currently use Dealer Solutions.

By now you should also have reviewed your Sales Contracts and internal proceedures to ensure that you are ready for the changes on January 30th 2012. Click Here to watch our short presentation on other things for Dealers to consider for PPSR or Click Here to view the complete list of PPSR Tutorials.

If you need help with PPSR, would like to use Dealer Solutions for PPSR or are an existing customer wanting to be set up as a Secured Party, please call us on 1300 66 11 33 or Click Here to Apply Online

YES – Sales Contracts printed from Dealer Solutions Dealerlogic Inventory Management System have been updated to include new PPS clauses to ensure that Dealers using Dealerlogic are covered under the PPS Act. The changes update retention of title arrangements and ensure that Dealers have the ability to register Security Interests in vehicles where applicable.

These revised Sales Contracts will be available in Dealerlogic from January 30th 2012

REVS will close at 5pm on Friday, 27 January 2012. The PPSR will commence operation on Monday, 30 January 2012. All existing security interests held on REVS will be migrated across to the new national PPSR over the weekend of January 28th – 29th 2012.

REVS will be searchable over this migration weekend. Certificates issued will be watermarked to note that they are only current as at 5pm on Friday, 27 January 2012 (Qld time).

Queensland Motor Dealers must still provide REVS Certificates for sales made on Saturday January 28th.

From Monday January 30th Queensland Motor Dealers should search the PPS Register. Click here to sign up for PPSR Protection now!

Click Here to view a sample PPSR Search Certificate.

Consumer goods with a market value of not more than $5,000, which (for example) people might buy from a retailer, pawnbroker or at a garage sale are subject to certain exceptions under the PPS Act. These excemptions DO NOT apply to motor vehicles, even if their market value is $5,000 or less.

Holding Redlich Says…

Yes – Both new and used vehicles are caught by the PPS regime. A motor vehicle is a type of personal property that can potentially have a security interest registered against it.
Failure to ensure that security interests have been removed over vehicles sold to customers will expose a dealer to potential damages claims. As noted above, it is therefore prudent for dealers to obtain a clear PPS search before selling a vehicle and to provide it to customers to satisfy any queries they may have regarding title to the vehicle.

Dealer Solutions Opinion – Dealers should perform a PPSR search and ensure that vehicles are clear prior to sale.

PPSR searches will be available through Dealer Solutions, one of the only Motor Industry specific search and Security Interest lodgement providers. Dealer Solutions have been providing REVS services to dealers since the mid 1990′s. We offer online access that can be integrated with your inventory to enable easy selection of VIN’s. Together with this, we offer the ability for you to store and manage your PPSR searches.

Existing Dealer Solutions REVS customers will automatically change over to PPSR. Other Dealers that want to be ready for PPSR should contact us now and arrange an account and online access.

There are no fees or charges to set up an account, so act now and be ready for PPSR. Call us now on 1300 66 11 33 or contact us through our website www.dealersolutions.com.au

See Dealer Solutions PPSR Protection on You Tube

Yes. From 5:00 PM Friday January 27th 2012, all of the state operated REVS registers will close and be replaced by a new single national law and register called the Personal Property Security Register (PPSR). The new PPS Register is operated by the federal government and covers all states in real time. The new register commences operation on Monday January 30th 2012

A novated lease has been arranged between a Leasing Company and their customer. The Leasing Company placed an order with a Dealer and arranges delivery details for their Customer.

The Dealer has the vehicle in stock under a floor plan arrangement with a floor plan financier, who has registered a security interest in the vehicle (the dealer is the Grantor and the financier is the Secured Party).

The Dealer delivers the vehicle to the novated lease customer. The Lease Company registers a PMSI against the vehicle. The Dealer is required to pay out the floor plan financier 14 days after delivery. The Leasing Company is proposing to pay the Dealer 28 days after delivery and to take title to the vehicle.

Holding Redlich Say….

1. Should the dealer register a PMSI and, if so, when and how?

If the Dealer is delivering the vehicle to the Leasing Company before the Dealer receives payment of the full purchase price, ideally the Dealer should register a PMSI over the vehicle on or before delivery. In order to register a PMSI the Dealer needs to ensure that its contract of sale with the Leasing Company enables the dealer to register a PMSI and that this is permitted under its floor plan financing arrangements. If no PMSI is registered, the Dealer will be an unsecured creditor of the Leasing Company.

2. How does the PPS Act affect the grey area in the diagram? If 3 parties have perfected interests, who takes priority?

If all three parties have perfected PMSIs in the vehicle then generally the time of registration will determine priority (unless other priority arrangements have been agreed). This will mean that the perfected PMSI registered first in time will typically have first priority.

However, a perfected PMSI will have priority over a security interest which is not a PMSI even if that security interest is registered earlier in time.

3. Does the Dealer need to pay out their financier on or before delivery before the Dealer can register an interest in the vehicle?

Whether or not it will be necessary for a Dealer to have first paid out its financier and arranged for the removal of the financier’s security interest over the vehicle before it can deliver the vehicle or register a PMSI will depend on the terms of the financing arrangements with the financier and the contract with the Leasing Company.

It is likely though that the Leasing Company will insist on receiving clear title to the vehicle on delivery and that the financier will refuse to remove its registered security interest over the vehicle unless it is paid out. This means it will be preferable to schedule the transaction so that payment by the Leasing Company, removal of the financier’s interest in the vehicle and delivery of the vehicle occur contemporaneously.

If the Dealer is in a position to pay out the financier in order to obtain a release of the financier’s interest over the vehicle prior to receiving payment from the Leasing Company, it would then be prudent for the Dealer to ensure the contract for the sale of the vehicle to the Leasing Company enables the dealer to register a PMSI over the vehicle on or before delivery which is only to be removed once the Dealer receives payment of the purchase price in full. The Dealer’s PMSI would need to be registered prior to any PMSI the Leasing Company may register or there would need to be an agreement with the Leasing Company regarding priority of the 2 PMSIs.

Click here to view a diagram of this case scenario

Holding Redlich Says…

A buyer who searches the PPS register by reference to the serial number of a motor vehicle and obtains a clear search on the day of, or on the day before, the purchase will generally take the vehicle free of any security interest (subject to certain exemptions discussed above such as where the buyer has actual or constructive knowledge of the security interest). However, a dealer buying a vehicle will not automatically take a vehicle free of a security interest if it obtains a clear search by reference to that vehicle’s serial number.

In addition to searching by reference to a vehicle’s serial number, dealers should carry out a search of the register at the time of purchase by reference to the name of the vehicle’s owner. If that search is also clear, the dealer will generally take the vehicle free of any unperfected security interests unless the dealer has been party to a transaction which created or provided for that unperfected security interest.

However, dealers should also be aware that certain transitional security interests (eg retention of title arrangements put in place before the commencement of the new legislation) will generally enjoy temporary protection during a 2 year period after the legislation takes effect. These transitional security interests also need to be considered and dealt with by dealers when buying a vehicle.

Dealer Solutions Opinion – PPS is very different to REVS. Checking whether a security interest exists on a vehicle on sale protects the dealer from unwittingly selling a vehicle to the public with an existing interest (the interest may then fall back to the proceeds of the sale).

With Dealer to Dealer transactions, the purchasing dealer does not necessarily take the vehicle free of any interests. Any existing security interest moves with the vehicle on sale.

Holding Redlich Says…

Dealers will need to consider in each case whether a PMSI is the appropriate type of security interest to register. Generally, however, a PMSI will be the appropriate type of security interest when the security interest taken by a dealer in a motor vehicle secures all or part of the purchase price payable by the customer for the purchase of that vehicle and the contract provides that the dealer retains title in the vehicle until the whole purchase price has been paid.

Holding Redlich says…

A security interest in a vehicle is perfected if: (a) it has “attached” to the vehicle (eg a security interest has been created over the vehicle); and (b) it is enforceable against third parties (eg because the grantor and secured party have entered a security agreement to create the security interest); and (c) certain extra steps have been taken to protect the interest (eg possession or registration of the interest on the PPS Register). Certain security interests created prior to the commencement of the PPS legislation also enjoy some degree of temporary perfection during a 2 year transition period or are being “migrated” onto the PPS register (such as REVS interests or charges registered with ASIC).

If a security interest in a vehicle is perfected, it takes priority over another security interest that is unperfected when the security interest comes to be enforced.

Dealer Solutions Opinion – Dealers should Perfect any interest they have in a vehicle by registering it on the PPS Register. Failure to do so could void the sale contract’s retention of title clause.

Holding Redlich say…

A secured party is typically the party who holds the security interest in the vehicle. A grantor is typically the party who has the interest in the vehicle to which a security interest is attached.

For example, if a dealer has given a financier a security interest over its floor stock, the dealer will be the grantor and the financier will be the secured party.

Dealer Solutions Says…

Yes. A search of the PPS Register will also retrieve vehicle information from the National Exchange of Vehicle and Driver Information System – NEVDIS. Depending on the information NEVDIS holds, this will include written off and stolen status information.

Holding Redlich Say…

It is prudent for a motor dealer to register a security interest on the PPS Register in any vehicle it sells and delivers to a third party prior to receiving full payment for that vehicle. The interest should be registered prior to delivery.

Typically, the type of interest that should be registered is a purchase money security interest (or PMSI) depending on the relevant contractual terms with the customer. A motor dealer with a PMSI may benefit from a ‘super-priority’ which defeats all other security interests in the vehicle, provided certain registration requirements (including the applicable timeframe for registration) have been complied with.

Care needs to be taken though when registering security interests to ensure they are accurately registered as defective registrations may be ineffective. In this context, it is important that the dealer correctly identifies whether a PMSI is the appropriate type of security interest to register

Holding Redlich says…

Although the terms of finance arrangements may vary, it is probable that a financier may hold registered security interests over a dealer’s floor stock and that the dealer may effectively be contractually obliged to obtain a release of the financier’s security interest over each vehicle prior to sale. Breach of this kind of contractual obligation may have adverse consequences for a dealer under the terms of the dealer’s finance facility.

Dealer Solutions Opinion – Dealers should contact their floor plan financier now to ensure that any change to their payout requirements are understood and met prior to PPSR.

Dealer Solutions opinion

Yes. Searching the PPS Register provides point in time information only. The new PPS regime potentially allows anyone to register a security interest in motor vehicles and it is possible that security interests may have been registered over a vehicle without a dealer’s knowledge.

Dealers should perform a PPSR search and ensure that vehicles are clear prior to sale.

Dealer Solutions say…

Dealers that are existing Dealer Solutions REVS & VCheck customers will automatically change over to PPSR on January 30th 2012. REVS will simply be replaced with PPSR and Dealer Solutions will continue to provide full integration with both their online and inventory management software solutions.

Dealers wanting to prepare for PPSR and benefit from Dealer Solutions feature rich integration should contact us on 1300 66 11 33 or Click Here for other contact options.

Holding Redlich say…

If a vehicle owner’s financier has a registered purchase money security interest in a vehicle which a dealer has agreed to sell on a consignment basis, typically (and depending on the nature of the financier’s perfected interest) the financier would have priority over the owner’s interest in the vehicle and the proceeds of any sale of the vehicle to the extent those proceeds are traceable.

If a dealer sells a vehicle held on consignment, the purchaser of the vehicle (if the purchaser is not a dealer) would generally take the vehicle free of any security interest even if a financier has registered a security interest in that vehicle on the PPS register, subject to certain exceptions. It is therefore likely that a financier would typically seek to pursue its rights against the dealer selling the vehicle to recover the proceeds of sale to the extent they are traceable.

For these reasons, it is therefore prudent for a dealer proposing to sell a vehicle on consignment to carry out a PPS search to see if the vehicle is encumbered prior to entering into the consignment arrangement with the owner and prior to selling the vehicle. If the vehicle is encumbered, it would be advisable for the dealer to discuss the proposed consignment arrangement with the financier and to put in place appropriate arrangements with the financier in relation to the proceeds of sale.

Dealer Solutions Opinion – Dealer’s taking vehicles on consignment from the public should check the register prior to accepting the vehicle and again prior to sale. If an interest exists, the dealer should contact the financier prior to sale to ensure that the financier’s payout requirements are met.

Holding Redlich say….

Commercial consignment arrangements between dealers will generally amount to a security interest under the PPS regime and a dealer entering consignment arrangements with another dealer to sell a vehicle can (and should) register a security interest in that vehicle.

Holding Redlich say…

If a licensed motor vehicle dealer sells a car to an individual then under the PPS regime that individual will generally take the vehicle free of any security interest even if a financier has registered a security interest in that vehicle on the PPS register. This means that an individual buying a motor vehicle from a licensed dealer  will generally not be required to obtain a clear PPS search prior to buying the vehicle.

There are however some important exceptions which apply and a buyer will not necessarily take a motor vehicle free of a security interest if:
(a) the secured party (eg a financier) was in possession of the vehicle immediately before the buyer acquired the vehicle;
(b) the vehicle is sold by or on behalf of an execution creditor (eg a financier);
(c) the buyer holds the vehicle as inventory or on behalf of someone who would hold the vehicle as inventory (eg the buyer is a motor vehicle dealer); or
(d) the buyer has actual or constructive knowledge that the sale would breach the security agreement that provides the security interest.

However, even if the consumer takes the vehicle free of the security interest, typically a financier will have a security interest in the proceeds of the sale as well as the vehicle itself. It would therefore be prudent for dealers to ensure that all security interests are released and it is also likely that failure to do so will have adverse consequences under the finance facility in place with the financier (depending on the terms of that facility).

As motor vehicle dealers are required to give certain guarantees with respect to vehicles sold to consumers under the Australian Consumer Law in relation to title and undisclosed securities and dealers cannot contract out of these statutory obligations, dealers will generally need to procure that all registered security interests over a vehicle are removed prior to it being sold to the customer.

Dealer Solutions Opinion – Under PPSR, a financier’s interest in a vehicle will include the proceeds of any sale.  Dealers should ensure that interests are released prior to a vehicle being sold to the customer.

Dealers should also contact their financier now to ensure that any special requirements they have for PPSR are met.  This may include changes to your delivery process and documentation.

From the Queensland Department of Justice & Attorney-General…

No, providing a certificate will not be compulsory under PPSR however Queensland Property Agents and Motor Dealers Act (PAMDA) it is still an offence if an auctioneer or motor dealer does not ensure the buyer gains clear title to a motor vehicle.

PAMDA also gives the buyer rights against a motor dealer or an auctioneer of motor vehicles if a security interest is registered against the vehicle upon sale.  The sale is deemed ineffective and the auctioneer or motor dealer must return the purchase to the position they would have been in before the purchase.

Dealer Solutions Opinion – Checking the PPSR register on the day of sale and providing the purchaser with a clear certificate, demonstrates disclosure, ensures that clear title can be guaranteed and safeguards against potential ramifications if an interest exists in relation to the vehicle.

Holding Redlich says…

Retention of title (ROT) interests in motor vehicles should be perfected under the PPS regime to protect the dealer in the event a buyer becomes insolvent or bankrupt. This is a major change from the current law. From 30 January 2012 on, it is therefore very important for dealers to register security interests on the PPS Register in relation to ROT arrangements. There is some transitional protection which applies in relation to interests created prior to 30 January 2012 or interests which arise out of a security agreement in force before that time and dealers may wish to seek further advice about this.
This will also impact on the terms of contracts of sale and it is recommended that these contracts be reviewed and amended to insert appropriate provisions to provide for registration of interests and deal with the PPS legislation generally.

Dealer Solutions Opinion – Yes, PPSR will affect the Retention of Title clause in your current sales contract.  Check with your contract provider, Lawyer or contact Holding Redlich direct for an opinion on your sales contracts.

Holding Redlich Say…..

There is no statutory obligation placed on motor vehicle dealers under Victorian or New South Wales law to provide a clear security interest search to customers. Under Queensland law, motor vehicle dealers are required to provide a security interest certificate to customers purchasing used vehicles but this obligation will cease once the new PPS regime takes effect.

However, motor vehicle dealers are required to give certain guarantees with respect to vehicles sold to consumers under the Australian Consumer Law in relation to title and undisclosed securities and dealers cannot contract out of these statutory obligations. It would therefore be prudent for dealers to obtain a clear PPS search before selling a vehicle and to provide it to customers to satisfy any queries they may have regarding title to the vehicle.

Dealer Solutions Opinion – It is no longer a compulsory requirement to provide a certificate to the purchaser of a vehicle however dealers should perform a search of the register prior to sale.

Holding Redlich say….

Motor vehicle dealers are required to give certain guarantees with respect to vehicles sold to consumers under the Australian Consumer Law in relation to title and undisclosed securities and dealers cannot contract out of these statutory obligations. The new PPS regime potentially allows anyone to register a security interest in motor vehicles and it is possible that security interests may have been registered over a vehicle without a dealer’s knowledge.

Failure to ensure that security interests have been removed over vehicles sold to customers will expose a dealer to potential damages claims. As noted above, it is therefore prudent for dealers to obtain a clear PPS search before selling a vehicle and to provide it to customers to satisfy any queries they may have regarding title to the vehicle.

Dealer Solutions Opinion – Dealers should perform a PPSR search and ensure that vehicles are clear prior to sale.

Holding Redlich say….

If a dealer sells a vehicle to another dealer that dealer will not take the vehicle free of any security interest. Financiers with a registered interest can assert their interest in a vehicle. Dealers buying vehicles from other dealers should therefore obtain a clear PPS search on the day of the sale or the day before that prior to proceeding with the purchase.

Dealer Solutions Opinion - Dealers should always perform a search of the register themselves or demand a certificate showing no registered interest prior to taking a vehicle from another dealer.