PPSR Implications for Leasing of Real Estate

Landlords do not always appreciate that there are personal property implications when they lease land. These can occur in relation to the security deposit held, goods which are abandoned, chattels which go with the premises or even leasing incentives paid by a landlord.

As such, it is important to obtain legal advice in relation to the effect of the Personal Properties Security Act 2009 (Cth) (“PPS Act”). If you are a landlord and you wish to make a tenant charge its interest in chattels then this creates a security interest which can be and should be registered.

Similarly if the landlord pays for the fit out and retains ownership of it then that too creates a security interest which the landlord can and should have registered under the PPS Act. Tenants need to be aware of these things as much as landlords.

If a landlord has rights over abandoned goods when a tenant vacates then that also could create a security interest in favour of the landlord which would be capable of registration.

If there are goods which are leased to the tenant then a security interest may be created so PPS Act searches are desirable to find any security interest registered in either the name of the tenant or the landlord.

If you are a tenant before commencing the lease you would ensure that none of the landlord’s goods which you are leasing have been provided as security to anyone including a former tenant or financier. If it is a financier then the tenant may be satisfied with a consent to the lease.

When acting for a landlord if there are goods to be leased then there are sophisticated and detailed clauses required to fully protect the landlord’s interests having regarding to PPS Act.

Care needs to be taken to ensure releases are obtained when these security interests terminate.