Using the PPSR to Protect Your Goods and Equipment

If your business supplies goods on credit or leases out equipment, your standard terms and conditions may not fully protect you. This is especially true if your customer defaults or becomes insolvent.

One of the most effective ways to protect your rights is by registering your interest on the Personal Property Securities Register, commonly known as the PPSR. But in order to rely on this protection, you need two key elements:

1. A legal right to register, which usually comes from well-drafted terms and conditions or a signed contract
2. A valid registration on the PPSR that is correctly completed and lodged at the right time

What Is the PPSR and Why Is It Important

The PPSR is a national online register that records security interests in personal property, which includes most types of goods, equipment, and other tangible assets. If you supply goods, lease out equipment, or finance assets, registering your interest on the PPSR gives you a legal right to reclaim those goods or claim proceeds if your customer fails to pay, becomes insolvent, or faces legal recovery action.

In other words, registration gives your interest priority over others, such as banks, other suppliers, or liquidators, provided it is done correctly and on time.

When Should You Register an Interest on the PPSR

You should consider registering a security interest if your business:

• Supplies goods on credit terms
• Includes retention of title clauses in your contracts, invoices, or T&Cs
• Leases or hires out equipment or personal property to others
• Provides goods or materials as part of a service agreement
• Offers vendor finance or delayed payment arrangements

If your arrangement falls under the definition of a security interest in the Personal Property Securities Act 2009 (Cth), registration is required in order to protect your interest against third parties.

Why Terms and Conditions May Not Be Enough

Many businesses rely on a retention of title clause in their invoices or terms and conditions. These clauses usually state that the supplier remains the owner of the goods until payment is received in full.

However, under the PPSA, this arrangement is treated as a security interest. Without registering this interest on the PPSR, your clause may not be enforceable against others, even if your customer has agreed to it.

This means that if your customer goes into liquidation, you may be treated as an unsecured creditor and lose both the goods and the money owed to you.

Establish the Legal Right to Register

You can only register a PPSR interest if you have a legal basis to do so. This typically requires:

• A signed agreement or accepted terms and conditions
• Clauses that clearly state your right to retain ownership until full payment
• A description of the goods or property supplied or hired
• Evidence that the customer agreed to those terms before or at the time of supply

Without this legal foundation, your PPSR registration may be invalid and unenforceable if challenged.

What Happens If You Do Not Register

Let’s say you supply equipment valued at twenty five thousand dollars to a client on credit. Your invoice includes a retention of title clause. The client pays part of the amount but then goes into liquidation.

Because you did not register your interest on the PPSR, the liquidator may treat the equipment as part of the client’s assets, not yours. You are left unpaid and unable to recover the goods, even though your agreement says you retain ownership.

This is a common and avoidable risk.

Leasing and Hiring Out Equipment

Leasing or hiring out equipment also creates a security interest under the PPSA in many cases. This is especially true where the lease is for a term of more than two years, or has no fixed term.

Even though you may retain legal ownership of the equipment, failure to register the lease on the PPSR could result in the loss of those rights if the hirer becomes insolvent.

Common Mistakes That Can Invalidate a PPSR Registration

Some of the most common errors include:

• Registering after the goods are supplied or after the customer defaults
• Using the wrong legal name, ABN, or ACN for the customer
• Selecting the incorrect collateral class
• Letting the registration expire without renewal
• Not having an enforceable contract in place before registration

These mistakes can result in a registration being ineffective or void.

How to Protect Your Business

To safeguard your business interests, we recommend the following:

1. Review your terms and conditions to ensure they contain enforceable security clauses
2. Ensure customers accept your terms before supply or leasing begins
3. Register your interest on the PPSR as early as possible
4. Double-check all details before submitting your registration
5. Keep a register of your PPSR records, including expiry dates
6. Seek legal advice if you are unsure whether PPSR registration is appropriate

How Ardor Legal Can Help

At Ardor Legal, we assist businesses in protecting their interests by preparing effective contract terms and ensuring their PPSR registrations are legally sound. We help clients identify when a PPSR registration is required, draft or update terms and conditions to support the legal right to register, make accurate and timely registrations, and review existing entries to ensure they are valid and enforceable. Our goal is to reduce your risk and give you peace of mind when supplying goods or leasing equipment.

If your business supplies goods or hires out equipment, let us help you protect what is rightfully yours. Contact us today to book a free 15-minute discovery call and find out how we can support your business.