Spike in PPSR Registrations due to Expire

Earlier this week, AFSA released their PPSR statistics for the 2018 June quarter.

While there’s not much that’s particularly surprising in the statistics (which you can find here) there is a new addition to the format, in that AFSA has now provided information regarding the number of registrations due to expire in the next 18 months.

I’ve drawn up a quick chart based on the figures, in as much as they relate to ‘Other Goods’ registrations (the type of registration most appropriate to the majority of trade credit suppliers):

While the picture from March 2019 onwards looks as we might have expected, this is preceded by a huge spike in expiries in January 2019, surrounded by high levels of expiring registrations from October to February.

While the last two days of January 2012 saw the start of the Register (and the previous three months a few waves of advanced registrations and migrations from other registers) I’m surprised that the registration activity that took place at those times didn’t concern itself, almost exclusively, with transitional registrations with an indefinite expiry.  As someone very closely involved with thousands of bulk registrations in those early weeks of the register, virtually all were lodged as indefinite transitional registrations.

However, clearly there were a great many registrations being lodged for only 7 years and these are now coming up for renewal.

I'll shortly be following up this post with a step by step guide to renewing registrations on the PPSR.

The PPSR doesn’t understand Retention of Title!

On 23/07/2018 AFSA, the operators of the PPSR, issued a news briefing regarding how the PPSR could assist a building developer in “using the PPSR to secure its retention of title in the material it supplies”.

Given that it would be unusual for a building developer to be doing the ‘supplying’ when it comes to materials, I thought I’d get a copy of the information sheet AFSA were promoting.

Sure enough the PPSR Case Study 11/V1, started with:

“Scenario – building developer uses the PPSR to secure its retention of title in the materials it supplies ...”

The information sheet goes on to elaborate as follows:

“Developer Sceneview owns land on which it has permission to build a warehouse.

It contracts with Projex to build the warehouse. The contract provides that Projex sources the material needed for the build process.

Projex will submit invoices to Sceneview for works and materials, whether the materials are on-site or off-site.

Sceneview has a security interest, under the contract, in all building materials in the possession of Projex, to secure performance of Projex’s obligations under the warehouse contract.

Sceneview registers that security interest against Projex on the PPSR.”

I don’t know about you, but the first thing that struck me was that it was Projex, as the supplier, that was most likely to hold a Retention of Title over the goods they were supplying.  While Sceneview may be contractually granted a security interest over goods in the possession of one of their contractors, such a right would not be a Retention of Title right.

The information sheet then hints that it knows that what it is describing is not really a Retention of Title right, because it goes on to suggest that ‘Sceneview’s’ registration will only defeat a competing registration by a bank by virtue of having been lodged earlier.  If the registration concerned a true Retention of Title right it would have been eligible for PMSI treatment and the relative timing with a bank registration would have been irrelevant.

I wrote to AFSA drawing their attention to their description of an ROT interest, not actually being an ROT interest and, a couple of days later, got a phone call from quite a pleasant lady who explained that they already had concerns internally over the information sheet in question and had been reviewing it even while it was being actively promoted as part of an email campaign. 

As anyone who has had dealings with civil servants will appreciate, there was no admission that an error might have taken place, nor any explanation as to why a misleading information sheet not only remained as part of the PPSR’s help documents (it’s still there at the time of writing by the way) but was then selected for specific dissemination to a wider audience. They were gracious enough, however, to acknowledge that, I was ‘not necessarily wrong’ in the error I had pointed out. 

Bless them.

Proposed Fee Changes

On the 11^th April the Australian Financial Security Authority (AFSA), which operates the PPSR, issued a consultation document regarding changes to the PPSR’s fees intended to take effect from 1^st July 2018.

With the PPSR having, effectively, earned back its own development costs in its first 3 years of operation, its fees are now, pretty much, only there to ensure it covers its own running costs.  Given a steady growth in registration activity, AFSA believes that it can reduce its fees and yet still cover its own costs for the next few years and has thus proposed the following reductions:

Activity	Current	Proposed
7 year registration	$6.80	$6.00
7 to 25 year registration	$34.00	$25.00
Indefinite registration	$119.00	$115.00
Searches	$3.40	$2.00

The consultation document is silent on the matter of fees for ‘Minor Amendments’ and the reissue of Verification Statements.

Minor amendments include changes to:

• Free text description (collateral description)
• Subordination Indicator
• Giving of notice identifier
• Proceeds Indicator and description
• Vehicle Registration Number (i.e. the number plate of the vehicle)
• Aircraft Nationality
• Aircraft nationality code and registration marks assigned pursuant to the Chicago Convention (where not used as a serial number)

Minor amendments and the reissue of Verification Statements are currently charged at $3.40 each.  I’ve written to AFSA querying these omissions.

The consultation document can be found at https://www.ppsr.gov.au/cost-recovery-implementation-statement with any comments required to be forwarded to stakeholders@afsa.gov.au by 6pm on Friday 4^th May.

UPDATE: AFSA has now advised that 'Minor Amendments' such as changing Collateral Descriptions will (should the proposed new charges be accepted) no longer attract a charge from the PPSR.  Similarly, if the proposed new fees are accepted, the reissue of Verification Statements will also not attract a fee.

UPDATE #2: AFSA has issued a notice advising that the planned implementation of the fee reductions will need to be delayed in order to give certain stakeholder groups longer to prepare for the fee reduction.  I don't pretend to understand why it would need to take more than 2 months to prepare for a small fee reduction but, nevertheless, there will be a delay.  No fresh implementation date has been given at this point but I will update again when this is announced.


UPDATE #3: We've now had confirmation that the new fees will be implemented on 1st August 2018 following approval from the Attorney-General.

PPSR Statistics & the Rise of 'Other Goods'

The Australian Financial Security Authority (AFSA) – perhaps better known as the people that run the PPSR – released, earlier this month, PPSR related statistics for the July-September quarter.

I’ve included a link here.

As at the end of September, there had been a total of 19,265,693 registrations, of which marginally under half were still current.

The largest single collateral class overall was, unsurprisingly, Motor Vehicles, accounting for 49% of all current registrations (although if you take Consumer related transactions out of the picture this drops to 34%).

However, what caught my eye this time around was the extent to which Other Goods registrations have come to dominate over the last 5 years.

5 years ago, All Present & After-Acquired Property registrations (AllPAAPs) accounted for a little over 2 million registrations while Other Goods registrations made up less than a million (944k).

This shouldn’t be too much of a surprise; AllPAAPs are primarily the preserve of banks and financiers who would have been all over the PPSR upon its introduction, ensuring their security interests were properly protected from the outset.  Other Goods registrations, on the other hand, are very much the tool of the trade credit supplier with Retention of Title rights and, as we know, this disparate group is not always the most organised or receptive when it comes to ‘Government Red Tape’.

However, things have changed considerably over the last 5 years with AllPAAP registrations remaining pretty static (even declining slightly) and Other Goods registrations steaming ahead as trade credit suppliers get the message that PPSR registration represents one bit of Red Tape they need to adopt if they are to protect their rights over their unpaid goods and give themselves a better chance of fending off liquidators’ preference claim clawbacks.

With over 2.6 million current registrations, Other Goods now represents the largest collateral class for non-consumer registrations.

There is every indication that this trend will continue as trade credit suppliers come to terms with the fact that the PPSR isn’t going anywhere and failing to embrace it will only contribute to them suffering larger losses than they need to.

PPSR Statistics and Transitional Registrations

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.

Forthcoming PPSR Fee Changes

Just to give you the heads up on a forthcoming change to the PPSR’s registration fees.

The scheduled change is still subject to sign off by the Government but, given that the formal Cost Recovery Impact Statement (CRIS) produced by AFSA has been made publicly available, I’d suggest that sign off will be little more than a rubber stamping of the CRIS proposals.

From 1/07/2015 the following fee changes are proposed:

Activity	Proposed Fee	Current Fee
Registration up to 7 years	$6.80	$8.00
Registration 7 to 25 years	$34.00	$40.00
Registration – Indefinite	$119.00	$140.00
Minor Amendment	$3.40	$4.00
Search	$3.40	$4.00
Discharge	$0.00	$0.00

For major amendments the fee will continue to reflect the equivalent new registration charge for the duration of the registration.

Why the proposed reduction?

So far, the fees charged by the PPSR have included a component to finance a repayment of the Government's start up investment in the Register.  This repayment is scheduled to be completed by 30th June 2015 thus charging beyond that date may be reduced proportionately - this amounts to a 15% reduction across the board.

As I have previously written on the importance of timely registration, it would be foolish to consider waiting until the new charges are introduced before lodging registrations!

PPSR Registration Stats

Yesterday (20/10/14), AFSA released its quarterly statistics for the PPSR.

After the 'excitement' of the first quarter figures (which captured the race to register before the 2 year Transitional period expired), this quarter, and the previous quarter, show little of interest by way of registrations; although, it is slightly interesting to note the continued growth in searches of the Register.

Total number of registrations reached 8,305,528 by 30th September and the collateral classes covered show a clear domination by registrations of interests over Motor Vehicles:

Agriculture	66,818
Aircraft	12,639
All present and after acquired property	1,774,352
All present and after acquired property, except	220,432
Financial property	29,199
Intangible property	85,319
Motor vehicle	4,239,378
Other goods	1,834,231
Watercraft	43,160