02/03/2012

This Act is now law throughout the Commonwealth of Australia, with the exception of Western Australia. 

We received this question on PPSA recently from a financial planner:

Do you know how the PPSA will affect vendor finance or rent to buy contracts for residential property?

We advised as follows:

As a general guide only:

1.    The PPSA generally excludes interests in land. So, if a vendor sells residential real estate to purchasers and has that finance secured by a registered mortgage over that property (or other real estate), the PPSA is not relevant.

2.    To maximise protection for the vendor, the mortgage should be registered with the relevant land titles office, in accordance with the legislation of the particular State or Territory.

3.    A similar situation would apply if the "rent to buy" was to be secured by a lease over the residential property. As a lease over the property is not a lease of personal property (such as goods) the PPSA is again not relevant.

4.    Again, the lease should be registered with the relevant land titles office to maximize protection for the vendor/landlord.

5.    However, if vendor finance was granted to a company purchaser and was secured by a guarantee from a director of the company, if the director/guarantor specifically charged his personal property, that would be a security interest under PPSA. That security interest should be registered on the PPSR to maximise the vendor’s security, subject to the PPSA.

For further information on Guarantees and the PPSA, please go to www.townsendslaw.com.au

If you have any questions in relation to this article, please contact TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222 or email info@townsendslaw.com.au