AFSA (the people that operate the PPSR) released their
statistics for the quarter ended 31 March 2017 this morning.
The report, which is quite brief, only comprising seven,
easy to read, tables, can be found here.
There’s nothing terribly exciting contained in the report -
registrations against motor vehicles account for a little under half of all
registrations and a little over half of all searches, and intangible property still appears to be substantially better
protected as collateral than agricultural
property.
However, what puzzled me was the fact that, during the
January – March quarter, 18,686 of the half a million or so registrations
lodged were designated as Transitional.
While 18,686 is not very much in percentage terms (3.7% to
be precise) it still represents an awful lot of new registrations asserting
that the security interest they are intended to protect arose out of an agreement
put in place over 5 years earlier and remaining unchanged since that time.
When the PPSR first started, Transitional registrations were
free to lodge and, regardless of the date of the registration, the perfection a
Transitional registration provided was, effectively, backdated to before the
PPSR’s commencement. However, when the
Transitional arrangements ended in February 2014, although still free, the
perfection granted by a Transitional registration was no longer backdated and,
like non-transitional registrations, only applied from the registration
date. From July 2015, Transitional
registrations ceased to be free and began attracting the same charges as their
non-transitional equivalents.
The only real difference now between a Transitional
registration and a non-transitional registration is that section 337A of the Act states that if you identify your registration as relating
to a Transitional security agreement it will be ineffective for any collateral
that is not covered by a Transitional agreement. There is, of course, also that annoying section 51 of the Corporations Act that states that a Transitional security interest doesn't count as a PPSA Security Interest!
In other words, if you designate your registration as Transitional
and it turns out that your security interest isn’t, your registration will be,
effectively, worthless.
Importantly, there is no equivalent clause in the Act stating that non-transitional
registrations would be ineffective if it turns out they concern Transitional
security agreements!
Thus, mistakenly identifying your registration as
non-transitional isn’t half as dangerous in its implications as mistakenly
identifying it as Transitional!
While I can certainly understand lodging a Transitional
registration during the first couple of years of the PPSR, and can understand
the attraction of not being charged for lodging a Transitional registration up
to July 2015, I’m not sure I understand the reasoning behind persisting with lodging
Transitional registrations today.
18,686 represents the second highest number of Transitional
registrations lodged during a quarter since the PPSA’s Transitional
Arrangements came to an end and brings the total number of Transitional
registrations lodged since that time to over 175,000 – of which almost 100,000 were lodged since the price differential was removed.
I can’t help worrying that there are a significant number of
businesses that started following a template for registrations 5 years ago and
haven’t made any moves to update it since.
My advice remains:
- If the agreement signed between you and your customer is dated after 30/01/2012 then you should register as non-transitional.
- If your applicable Terms and Conditions have been amended since 30/01/2012 you should register as non-transitional.
- If you can’t find a copy of your agreement with your customer then you should look to get a fresh one signed and register as non-transitional.
- If your signed agreement doesn't incorporate your security agreement and your retention of title clause only appears on your invoice then you should register as non-transitional.
- If you're in any doubt register as non-transitional.
Links to earlier articles relating to the Transitional vs
Non-Transitional ‘debate’ can be found here.
