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Business and Corporate Law, Commercial Contracts, Protecting Your Assets

The Australian Hire Industry and PPS Leases

Over recent years the Personal Property Securities Act 2009 (PPSA) has resulted in many hire businesses losing ownership of equipment due to failing to register the equipment correctly under the PPSA which leaves them open to risk when customers become insolvent.

This loss is due to hire businesses being unaware of the PPSA, or not managing to navigate the complex registration regime. As a result of these issues, the Government has introduced the Amendment Act in which a lease or bailment only becomes a ‘PPS Lease’ when:

  1. The agreed term, including any options, exceeds two years; or
  2. It continues for more than two years.

The amendments remove leases and bailments ‘for an indefinite term’ from the definition. A hire for an unspecified term is now not caught until it lasts more than two years.

These changes vastly reduce the regulatory impact of the PPSA on short-term hire and rental business, therefore, hire businesses should consider whether it is necessary to register at all.

Consequently, if equipment is being hired out, for a period less than two years, and the company hiring the equipment enters into liquidation, the liquidator is unable to access that asset as part of the liquidation process.

If equipment is being hired out for an extended period of time, the hire business must take careful consideration in registering the equipment under a ‘PPS Lease’.

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