When a consumer or company buys or leases personal property, it may already have a security interest(s) registered against it. This puts the buyer or lessee at risk of the personal property being repossessed. However, PPSA protects buyers and lessees from repossession in some circumstances.

 

As previously suggested, it is necessary to search on the PPSR to see if the personal property has a clear title. By doing the PPSR search, it will reduce the risk of the property being repossessed. For example, if someone buys a car that the seller owes money on, the lender could repossess the car if the seller stops repaying the loan. However, in some circumstances, PPSA may protect the buyers/lessees by allowing them to take the property free of security interests even if the property has a security interest(s) against it.

 

What is “motor vehicle” for PPSA purposes?

Depending on the type of property, the rules are different. The most common example may occur when buying cars or motor vehicles, either new or second-hand ones. Under PPSA, “motor vehicle” is broadly defined including cars, trucks, motorbikes and property that “is capable of a speed of at least 10 km/h, have a total motor power greater than 200 W, has a unique serial number. However, the vehicle must not run on rails, tram lines or other fixed paths.” The definition also covers property that is equipped with wheels and designated to be attached to or towed by, a motor vehicle, which can be towed at more than 10km/h and has a serial number such as agricultural equipment and mining equipment.

 

Consumer property vs. commercial property

Under the PPSA legislation, a “financing statement” supports the registration of a security interest. The financing statement provides the information entered by a secured party when making a registration on the PPSR. Under the specific motor vehicle registration rules, a financing statement for a motor vehicle must indicate whether a motor vehicle is a commercial property or a consumer property.

 

Consumer property

If the motor vehicle is consumer property, then the financing statement of it must set out its serial number, but not necessarily the grantor’s details. For example, if a car is used for domestic purposes, the financing statement will include Vehicle Identification Number (VIN) but not the grantor’s name and detail. Therefore, a search on the PPSR can only be done using the serial number.

 

Commercial Property

If the motor vehicle is commercial property, then the financing statement must include the grantor’s detail. However, it is optional to include the serial number. For example, if a truck is used for business purposes, the financing statement must include the grantor’s detail. However, it may or may not include the VIN.

 

The commercial security interests in motor vehicles do not have to be registered by serial number. Therefore, it is recommended that the buyer/lessee searches both against the grantor and the serial number as a serial number search may not reveal all security interests. By searching on the PPSR, buyers/lessees may be eligible to take the motor vehicle free of any security interest if the PPSA provisions have been satisfied.

 

Motor vehicle buyer/lessee protections

Under section 45 of the PPSA, the buyer/lessee will generally be able to take the motor vehicle free of security interests if:

  1. The buyer/lessee has searched with reference to the serial number immediately before buying or leasing;
  2. The search has not disclosed any registered security interest.
  3. The seller/lessor is either the person who granted the security interest or another person who possessed the motor vehicle.

 

However, one should be aware of exemptions to the protections. For instance, section 45 of PPSA will not apply if the buyer/lessee had actual or constructive knowledge of the security interest when buying/leasing the motor vehicle. The factual scenarios are different from case to case. If you are concerned about your interests regarding your motor vehicle or your motor vehicle has been repossessed by the grantor, contact Morrison Specter for professional legal advice.

 

Tips

At Morrison Specter, we understand that buying a car can be a significant purchase, and we will help to protect your rights. The followings are some tips when purchasing a car:

  1. Conduct a PPSR search before committing to a purchase or lease using the VIN of the car.
  2. If the car is purchased from a dealer, ask for a PPSR search extract. Check the date of search and whether the VIN matches the VIN of the car carefully.
  3. If the car is purchased from a private seller, ask for the VIN. Search on the PPSR the day before committing to the purchase.
  4. If there is any security interest against the car, further investigations might be needed.

 

It is always better to seek legal advice as the PPSA regime may be too complex to understand. If you need any help regarding PPSR, please do not hesitate to contact Morrison Specter for any assistance.