Supplying equipment on lease, rental or bailment terms
The Personal Property Securities Act (“PPSA”) is was introduced on 30 January 2012 and the Personal Property Securities Register (“PPSR”) opened that same day. The legislation is extremely harsh on equipment renters and bailers (parties that provide equipment on loan to a customer as part of a wider commercial arrangement – a free coffee machine for agreeing to buy coffee is a good example).
The preceding law treated these types of businesses and arrangements very differently, in that the party making the items available for rental, hire or loan would at all times own the equipment. If the customer defaulted, or became insolvent, the equipment owner was simply able to repossess their goods, as they did not form part of the insolvent estate.
PPSA has seriously altered this position. In brief terms, if:-
- a business leases, rents or bails equipment to its customers, and;
- the arrangement creates what PPSA calls a PPS Lease, and;
- the business fails to register on PPSR, then;
- the equipment owner will most likely lose their equipment on the insolvency of the customer and become an unsecured creditor.
This means that the equipment will be sold by the insolvency practitioner and the proceeds applied to the ‘insolvency pot’ to pay the insolvency practitioners fees, the secured creditors (generally the customers bank) in priority to the equipment owner.
This may seem incredibly unfair and many commentators concur but it is correct. Click here to see examples of where equipment renters have been caught out.
If you supply equipment to third parties, it is critical to know whether your agreements create a ‘PPS Lease’ and, if so, to understand how to achieve full protection. Even if there is doubt as to whether your arrangements are caught, the safest option may be to register. We have seen insolvency practitioners hold equipment for 12 months and more when the arrangement did not create a PPS Lease.
Our expertise lies in assessing how the legislation will affect businesses and putting in place the necessary strategies (and registration profiles) to achieve the desired level of protection whilst minimising registration cost, business disruption and labour resources. Our solution also provides continuity when key staff leave.
We make the whole process easy. It’s not costly or difficult to implement or maintain.
Why would you risk your rental equipment if you have a solution that means you don’t have to?
Contact us to get started.
We look forward to welcoming you as a valued client.