The PPSR explained: what it is, and how your business can use it

The PPSR, the Personal Property Securities Register, is the New Zealand government register of who has a security interest in personal property: goods, vehicles, equipment and business assets. If you supply before you are paid, registering your interest is how you protect your goods and your place in the queue if a customer fails. It costs $16.10 and lasts up to five years.

What is the PPSR?

The simplest way to explain it is the car you buy on finance. The finance company registers a security interest over the vehicle, so if the payments stop they can repossess it, and if you try to sell it on Trade Me, a buyer can look up the plate and see there is money owing. It is a registration the government holds of ownership or financial interest in goods, or in a business.

The law behind it is the Personal Property Securities Act 1999. And here is the part most business owners have never been told: the same register is open to you. If you supply goods, materials or work before you are paid, you can register your interest exactly the way a finance company does.

Three ways a business uses the PPSR

1. Goods you supply on credit

Say you make chocolate and supply it to a business that stores it and sells it on. If they fail before paying you, that chocolate may still be sitting on their shelves. You cannot simply go and get it back. You need a registered security interest in those goods to be able to legally recover them. The same goes for stock on hand, and for parts and components that have not yet been fitted to anything.

2. Your gear on someone else’s site

If you are a scaffolder with scaffold up on a development for months, or you have a digger on a job, you can register your interest in that equipment and the materials you have supplied. When a development goes into liquidation, the whole site gets shut down. You will hear people say, quickly, go and get your gear off. Once the liquidator steps in, what is physically on that site can be treated as part of the company’s assets, even though it may not belong to them. Registering your interest is how you get your things back.

3. The whole relationship

The third use goes wider. A general security agreement, registered on the PPSR, gives you a security interest in the assets your customer’s business owns, at the same level a bank takes. No bank lends $10,000, $100,000 or $1,000,000 without the right paperwork, a security interest and a credit check. If you are funding a project before you are paid, you are lending too.

Think of the creditors of a failed company as a queue. If 100 businesses are owed money and 10 of them are secured, registering moves you out of the 90 and into the 10. And within the secured group, your place generally depends on when you registered. So the sooner you register, the better.

Ask us how this fits your business

What it costs, and how long it lasts

• Registering: $14 + GST ($16.10). A registration is called a financing statement.
• Searching: $2 + GST ($2.30).
• How long: up to five years. Renewing costs the same as registering.

Two things catch people out. The register sends no reminder before a registration expires, and once it has expired it cannot be restored without a High Court order. So diary the renewal the day you register. As for the cost, it is not the reason to go without. If you are supplying anything worth more than the fee, the real question is whether you could absorb that job going unpaid.

Timing: the rule that decides where you stand

When you supply goods on credit and register a security interest in those goods, the law can put you ahead of a bank that registered first. That is called a purchase money security interest, and it depends on timing:

• Stock your customer will resell: register before they take possession of it.
• Other goods: register within 10 working days of your customer taking possession.

The clock runs from delivery, not from when the paperwork was signed. Miss it and you can still register, but you rank by the date you did.

Your terms first, then the register

Having a security clause in your terms of trade is only step one. Step two is actually registering that security interest. The two work together: your terms, accepted by your customer before the work starts, are what give you the right to register, and the register is what makes that right count against everyone else.

A good credit application collects what a registration needs: the company’s NZ Business Number, or an individual’s full name and date of birth. Get the legal name wrong and the registration may not protect you. Your customer is normally entitled to a copy of the registration within 15 working days, and terms of trade commonly ask them to waive that in advance. What goes in terms of trade.

What you can take back depends on what you supply

Recovering goods works when they can still be identified and lifted out as they were supplied. Once they become part of something else, what you can recover changes.

• Goods that stay as they are. Stock on the shelves, parts and components not yet fitted, and your scaffolding, gear and equipment on site. If the customer defaults, a registered interest lets you take them back.
• Goods made into something else. If your goods are mixed or manufactured into a product, your interest carries into that product, but only up to the value of what you supplied.
• Goods fitted to other goods. Parts a mechanic fits to a truck stay subject to your security, and can even rank ahead of the finance company on the truck. Taking them back means giving everyone with an interest in the truck 10 working days’ notice, removing the parts with no more damage than necessary, and paying for any damage you cause. They can also keep the parts by paying you what they are worth. In practice, you will rarely be able to strip a vehicle or machine you have worked on.
• Goods built into a building. Pipes, wiring, cladding, windows, or a boiler plumbed into a home or a factory become part of the building once they are installed, and the PPSR stops applying to them. You cannot take apart someone’s home or workplace to get them back.
• Services. If what you supply is labour, there is nothing to take back.

For the last three, the protection that works is a general security agreement: a security interest over the assets your customer’s business owns, beyond the goods you supplied. Deposits and progress payments do the rest. Which of these you need depends on what you supply and how it is used, and that is worth knowing before the work starts.

What the PPSR cannot do

• A company that owns nothing. Security is only as good as the assets behind it. A general security agreement over a trading company whose assets sit somewhere else secures very little.
• Guarantee you get paid. It puts you in a far better position, and gives you leverage and a process. It does not make an unpaid invoice disappear.

Talk to us about your protection

Search before you give credit

The PPSR is not just something finance companies use. It is a practical risk-checking tool for any business that provides goods, work, materials, repairs, services or credit before it is paid. A $2.30 search shows whether someone else already has a registered interest in your customer’s goods, vehicles, equipment or wider business assets, and so who would stand ahead of you.

For a vehicle, search by plate, VIN or chassis number, and do not assume you are the only party with an interest in it. For other goods, search against the customer: the registered company, its NZ Business Number, the trading entity or the individual. You need a genuine business reason to search, and deciding whether to give someone credit is one. Checking a customer before you give them credit.

Why so few businesses use it

Is the PPSR underused in New Zealand? One hundred percent. But then so is credit checking. Most people have never heard of it, and when they do it sounds like something for banks, wrapped in legislation that needs explaining properly. So it gets left until a customer is already in trouble.

By then it is usually too late. A registration made once a customer is failing rarely changes the outcome, and security taken at the last minute can itself be challenged by a liquidator. The PPSR and your security documents need to be dealt with before trouble starts, not once liquidation is looming.

Make it part of taking on a customer

If you are going to be treated like a bank, think like a bank. Have a look at your debtors and your upcoming projects, and ask where your goods, your gear and your money are exposed. Then build the PPSR into how you take on a customer: the clause in your terms, the details on your credit application, the registration made on time, and the renewal in the diary. Done that way, it is a few minutes of admin that sits quietly in the background until the day you need it.

For where a registered supplier sits when a customer fails, see who gets paid first in a liquidation.

This page is education and commercial insight from our own research and experience, not legal advice. Do your own research, and get legal advice for your own situation.