Personal Property Security Reform At Last
PERSONAL PROPERTY SECURITY REFORM AT LAST
Buyers of second hand goods and retail lenders are finally about to get the legal protection they deserve. After over a decade of discussion, it looks as though introduction of a compressive system of registration of secured transactions in New Zealand is a reality.
It is expected that the Personal Property Securities Bill will pass through it's final legislative stages tonight or tomorrow. This legislation introduces a radically different regime modelled on Canadian legislation.
The new legislation will introduce a centralised and universal system for registration of charges over personal property. The new register will be similar to the existing motor vehicle security register but will encompass all types of personal property, excluding only ships, land and life insurance. The register will be entirely electronic and is likely to be accessible for registrations only via the Internet. All forms of security interest will be registerable and the regime will apply equally to securities granted by individuals and companies.
Of particular note is inclusion of retention's of title within the interests that will require registration. Many trade suppliers will need to review their "title does not pass until payment received" terms and register those arrangements.
The legislation also introduces uniform rules regulating priority of competing security interests. The priority of a secured lender's claim will generally be governed by the date of registration of the interest. Unregistered interests will loose priority and will be defeated by the claims of those holding registered charges. Equally buyers of second hand goods and lenders taking security will be able to protect themselves by completing a search of the register. They can not loose out to unregistered charge holders.
Consumers are also given super protection. Where goods are purchased from a business in the ordinary course of that business, the buyer will not be affected by any security over those goods, whether or not it is registered, unless the consumer has actual knowledge of the security. Equally buyers of consumer goods of less than $2,000 will not be affected by any security interests over those goods if they don't have actual knowledge of the security. Garage sale buyers will be able to buy in confidence.
Lenders who lend to enable the purchase of particular property also receive advantages. If they give the appropriate notices to the holders of general securities (usually a bank holding a debentures) these "purchase money lenders" will gain priority.
Existing securities, registered under one of the existing registration systems will remain valid for a period of six months from commencement of the new legislation (expected to be June 2000). But after that period they will loose priority unless the lender reregisters under the new legislation. Many commentators have criticised the brevity of this period and the cost it will impose on lenders.
Another area of criticism has been around privacy issues. It is envisaged that the register will enable electronic searching on a number of identifiers. Of principal concern will be the ability to search the register by use of a debtors name and compile a complete picture of all securities granted by that borrower. Critics have suggested that the register should be limited to searching for securities over specified items of property. This however would complicate the procedure for registration of "retention of title" securities. It had been anticipated that a generic registration, limited only to the names of the buyer and the seller would be required. Specific registration of each item sold under a retention of title would seriously limit the usefulness of this type of security and increase the cost of its use. It is on these Privacy issues that the Bill's progress has been held up to date.
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