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Your legal Questions answered
Personal Property Securities Act - What it really means for Plumbers!
Approximately 1 in 5 construction companies end up in administration or liquidation, a concerning statistic.
However, there are several ways plumbers can protect themselves in the event a contractor goes bust.
A key statutory tool available is about protecting a “security interest” in goods you have provided to the contractor.
In this article, we address how the Personal Property Securities Act (PPS Act), a national law which regulates “security interests”, can protect you and get back materials supplied in the event a contractor you work for goes under.
What is a security interest?
A “security interest” is a legal interest in personal property such as any materials but excludes real estate property.
Typically a security interest is created by a clause in a standard terms and conditions contract that retains ownership of the materials you supply, until payment is made.
To protect a security interest, you need to have it recorded on the Personal Property Securities Register (PPS Register).
If a person does not register their security interest on the PPS Register, this will result in them losing that property if the contractor becomes insolvent.
Why do you need to register your security interest?
If you have supplied materials to a contractor, and have not been paid and you have not registered your interest in those materials on the PPS Register and the contractor becomes insolvent, then ownership of your materials passes to the Liquidator who may sell them and keep the proceeds.
Protection in this scenario is easily and inexpensively achieved by correctly registering your security interests on the PPS Register. Under the PPS Act the fact of a proper registration on the PPS Register is now more important than determining who actually owns the asset.
That is a fundamental change in the legal landscape and means you will lose goods you own unless PPS Act formalities are complied with.
How do you register a security interest?
Firstly, your written contract terms and conditions must include a simple clause that creates the security interest in the goods you supply, in which you retain ownership until payment.
The next part is registration which must occur within 20 business days of the paperwork.
The PPS Register is found online at www.ppsr.gov.au where you can register or search for a security interest.
The cost for registering an interest on the PPS Register is small, $6.00 for seven years, especially when compared to the potential full losses you may suffer if you do not register.
One registration with each customer is all that is needed. It will cover all your dealings with that customer for 7 years.
In the event of insolvency of the contractor, if you are properly registered, you will be entitled to recover your goods from site if they have not been fixed.
You will also be able to force the Liquidator to account to you for the value of any unpaid invoices which are owed by the owner to the builder and which invoices include any of your materials. You can effectively reach higher into the contractual chain of payment.
Ultimately, a valid PPS Registration can also give further grounds of defence to a claim for receipt of a preference payment if later made by a Liquidator.
Registering a security interest can be complicated for someone not regularly dealing with the PPS Register. We are specialists in the PPS Act and registrations and know what is needed to secure and protect your assets.
We offer all members of Master Plumbers a FREE telephone Legal Hotline and can assist you in searching or registering security interests on the PPS Register.
If you would like to contact our team to discuss any queries you may have about your terms and conditions and retention of title security interests, then please give us a call.
Digby Luckhurst-Smith
Associate
Lynch Meyer Lawyers
Ph: 8236 7663
190 Flinders Street, Adelaide SA 5000 DLuckhurst-Smith@lynchmeyer.com.au
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