Credit Risk PPSR and PPSA
5 mins read

PPSR registrations vs Retention of Title Clauses

Sometimes you think you’re protected, until all of a sudden you’re not. Contract clauses don’t always provide the bulletproof vest for your business that you might assume they do. Such is the case in instances of a Retention of Title clause. The only way to properly secure your loaning or hiring business as a creditor, should a loanee go insolvent, is through registration on the PPSR. Arm yourself with the right credit risk management tools now, to prevent the loss of expensive equipment or goods. 

PPSR registrations vs Retention of Title: what you need to know 

What is a Retention of Title Clause? A Retention of Title (ROT) clause sits within the terms and conditions of the agreement when your business loans or hires out particular property to a client, on written credit terms. Say you hire out a car to a business under a hire-purchase agreement, and they fail to meet their repayment obligations. It should, in theory, mean that you are eligible to reclaim the item as a priority. In practice, the reality may differ.  

The issue with many Retention of Title Clauses is that they aren’t as watertight, by themselves, as many business owners believe. When it actually comes time to claim the item you may discover that every other creditor had the same clause inserted into their agreement with that same business. 

If your clause isn’t officially recognised by the appointed liquidator or administrator as being more legitimate than any other, then repossession of the property may be far more unlikely than first imagined. They will determine the hierarchy of creditors by other means, and that may not be to your advantage. Relying on this clause alone may, in fact, be lulling you into a false sense of security, as you think you’re more protected than you really are.  

What is the PPSR? The Personal Property Security Register (PPSR) is a regulated online Australian Government log of officially declared security interests in personal property. A security interest is akin to a stake of claim on a certain item, say for example a car or boat. It is not a register of ownership. A security interest is only created in circumstances of a transaction between two parties, including hire-purchase agreements and secured car loans. The property in question becomes known as the collateral and must be classified according to class and type guidelines.   

How do they interact? A Retention of Title agreement essentially creates the security interest by default. They (the loanee) have the goods under certain credit terms, and you have an interest in ensuring that either the repayments are made, or you can repossess the item. It’s a matter of legitimising that interest as the highest priority. A clause in the agreement is often simply not enough, as outlined above. Where appropriate, the security interest created by the agreement must be registered with the PPSR, alongside any clauses or contract stipulations, to fully protect your business.  

If the company in possession of the item goes insolvent or fails to pay, your registry on the PPSR is essential to recognise you as a secured creditor. In the instance of Retention of Title claims, it will be recognised as a special Purchase Money Security Interest (PMSI). There are clear benefits to this, as it officially prioritises your business over other creditors in the eyes of a liquidator. The chances of recouping the item, or being compensated accordingly, rise significantly. Conversely, if you’re unregistered on the PPSR, your claim gets lumped in with every other unsecured creditor. This may even be despite a Retention of Title clause that you thought protected you. Chances of success reduce and risk exposure grows. 

Best practice credit risk management for hire and rental businesses 

Legitimising your security interest in Retention of Title agreements on the PPSR is imperative for your hire or rental business, but it can be a daunting prospect. It’s a seemingly vast and complex framework, and the accuracy of any information is critical. However, your business wants to avoid relegating the process to the dreaded ‘too-hard-basket’ and placing its faith in a clause in your agreement.  

There is a stress-free way to secure your interests and prioritise your business as a creditor. The PPSRLogic platform, powered by CreditorWatch, takes the hassle out of officially registering, managing and renewing your security interests. The intuitive features and simple user interface allow for a simplified registration process – one page, one click, and you’re done! It’s a fundamental layer of credit risk management for any business within this sector.  

Any existing interests can quickly be imported, and easy bulk registration capabilities are on offer for those hiring out a large number of goods. Amendments are simplified, and all information is verified according to CreditorWatch’s extensive business data and public records. If any of the details provided in the registration of a security interest are inaccurate: the whole claim could be voided. So, it’s essential that illegible handwriting and manual data entry mistakes are avoided, and this technology allows for that peace of mind. Further, as registrations are about to expire, or if particular details change, you’ll be notified with automated reminders – mitigating any continuity issues that may cause excess drama.   

PPSRLogic leverages best-in-class technology to secure your status as a priority creditor, and genuinely protect your hiring or rental business from the loss of expensive equipment. Together with the credit risk management and reporting capabilities offered by CreditorWatch, not only will you be minimising your bad-debt exposure risk, but you’ll also be protecting your interests should the worst-case scenarios of non-payment or insolvency eventuate. If it’s worth doing, it’s worth doing properly – and the suite of offerings from CreditorWatch empowers the business with the tools to ensure this happens.  

When empowered with PPSRLogic, you can engage in hire-purchase agreements securely and confidently, with the knowledge that you’re registering your interests according to best practices. Should a loanee go insolvent, you can feel safe in the knowledge that everything is in place to ensure the highest likelihood of recoupment or compensation.  

Book a demo to see how PPSRLogic can help get you to the front of the queue when dealing with liquidators. 

Victorian PPSR Sales Specialist
Jason Sutherlin has been with CreditorWatch for over 6 years and currently holds the position of Victorian PPSR Sales Specialist.
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