By Stephen Willis
Changes to the law in relation to the use of personal property as security will result in significant changes to business transactions involving items such as cars and boats.
Trainee solicitor Stephen Willis looks at what this will mean for the individual.
Personal property securities
We are all aware of real estate being used as security when taking out a loan, but most of us are less aware of personal property being used as a security.
Personal property covers forms of property that is not real estate and includes things such as cars, boats, machinery and crops, as well as intangibles such as shares, and intellectual property.
The Commonwealth Government is currently in the preparation stage of introducing new changes to the laws involving the use of personal property as a security. The changes involve the introduction of a single register for all personal property securities and the compacting of more than 70 different Acts across all states and territories of Australia to one piece of legislation.
The new scheme will enable the Federal Government to tie all these loose threads together.
When put into effect the laws will have significant changes to business transactions involving personal property.
What this will mean to you
The creation of a register will enable anyone who enters into a transaction involving personal property (e.g. a car, boat) to be able to check cheaply and easily whether it is subject to any claim by another party.
This information is necessary to ensure that the property you purchase, or obtain an interest in, will not be affected by an interest of someone else. For instance, a car may have been used as security for a loan by the previous owner. The new owner can then make sure that the previous owner has paid that debt by checking the register online.
Information such as details of the lenders, purchaser and information on the property would be included on the register. The introduction of this new scheme will lead to individuals and businesses obtaining cheaper finance. Lenders will more readily be able to secure their loans by obtaining an interest in the debtor’s personal property.
The introduction of a single piece of legislation will also reduce compliance costs for lenders since there will be an increase in legal certainty when making loans.
The lender can then safeguard this interest by registering that interest in the personal property register for everyone to see. The implementation of this new scheme is still in the discussion phase. The reform bodies are looking at basing the new reforms on New Zealand legislation which has already established a single personal property register.
Taking a close inspection of the New Zealand law, it appears that the All Blacks haven’t been the only good thing to come from the country.
