Motor Dealers and Personal Property Securities
The new Personal Property Securities (“PPS”) regime began on 30 January 2012. If you’ve not done so yet, you need to make some big changes to the way you do things.
What is PPS?
The PPS changes the law regarding “security interests” in “personal property”.
- Personal Property is everything except land and things attached to land (like buildings). It includes motor vehicles, stock, motor parts, machinery, boats, company shares, intellectual property, raw materials, plant, equipment, receivables, crops and livestock.
- Security Interests include retention of title clauses (Romalpa clauses), fixed/floating charges, hire purchase agreements, consignment agreements and various leases of goods and vehicles.
Motor dealers and the PPS
The PPS significantly impacts motor dealer businesses especially where you:
- Sell motor cars or any type of motor vehicle on credit;
- Purchase vehicles as trade-in;
- Hire or lease motor vehicles;
- Source motor vehicles on bailment finance or floor plan finance;
- Place motor vehicles with auction houses; or
- Sell spare parts or consumables on consignment or on credit.
So What and Who cares?
If you do not comply with the PPS regime, then you may be unable to recover stock if your customer goes bust, and you can also lose ownership over the motor vehicles which have been leased or sold by you.
Here are two examples:
- You sell parts to a body shop on 30 day terms. The body shop goes under and a liquidator is appointed to it. If you do not register your Agreement with the customer on the PPS Register, then you will most likely not be able to recover your parts. If you have registered your Agreement on the PPS Register, then you are entitled to recover your parts and if they have already been used up then you may be able to recover the sale proceeds instead.
- You lease motor vehicles to a customer who subsequently goes belly up. The monthly lease payments then stop and you want to get the motor vehicles back. With the new PPS regime, you MUST register your ownership of those motor vehicles on the PPS Register. If you don’t, your ownership could fall behind the security interests of others. Ownership of the motor vehicles could be lost altogether. In addition, you could be stuck with repaying the lease payments you have already received back to the liquidator under the “claw back” laws.
What do you have to do?
- Identify the arrangements in your business that will be caught by the PPS. For motor vehicle dealers, the vehicle (and parts) Terms of Sale, Hire Purchase Agreements, Lease Agreements, Bailment Finance and Consignment Agreements are most likely to be caught.
- Send these documents to Leigh Adams Lawyers. We will update them so that they comply with the PPS regime.
- Register relevant security interests in your motor vehicles on the online PPS Register & search the PPS Register as required.
- Book a session with us to have your finance, IT & credit staff trained to cope with the PPS.
Need more information?
If you need more information then contact us to see what aspect of your business is impacted by the PPS.