Providing security for borrowing or buying for a property

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If you are looking to buy on hire purchase, or looking to borrow money but do not own your own home, then financing statements secured against the Personal Property Securities Register ("PPSR") may affect you by providing the person/company supplying you with goods/money with security over your personal property.

A PPSR may affect you if you are looking to buy second hand goods, such as a car or farm machinery, as a PPSR will remain in place even if the goods are sold, meaning those goods may be taken back from you by the person who had a PPSR registered.

If you are a business owner supplying goods via trade account, or are considering loaning money to a friend or family member, a PPSR may affect you because it can provide you with security over the goods supplied or over another form of personal property to secure the money lent, reducing your financial risk.

What is the PPSR?

The PPSR was established in 2002 by the New Zealand Government as a one stop database for registering all security interests (claims against personal property, other than land). All information can be recorded, altered and searched through the PPSR website.

What are the types of security that can be registered?

There are two types of security options that you can register over a debtors property — a General Security Agreement or a Property Security Agreement.

What is a General Security Agreement?

A General Security Agreement ("GSA") is a form of security often used to secure commercial loans or credit arrangements.

It is typically used when a company is borrowing money and allows the lender to hold security over all the assets of the borrowing company. More than one GSA can be registered by parties who have an interest.

In the case of multiple GSAs being registered, a deed of priority should be negotiated between the parties to determine who has priority in the event of the borrower defaulting on their loan.

The deed of priority also allows secured parties to limit each other's priority to an agreed maximum amount.

What is a Property Security Agreement?

A Property Security Agreement ("PSA") creates a purchase money security interest ("PMSI") which is a specific security interest which is taken in collateral by the seller or lender.

For example, a hire purchase agreement relating to the purchase of an iPhone.

The benefits of a PMSI is that they can have a "super priority"over a GSA if the debtor defaults under the terms of their agreement.

It is not possible to identify whether a PMSI exists when searching on the PPSR.
Any disputes in relation to who has priority over particular collateral may be resolved by legal proceedings.

If you are unsure whether you have any financing statements registered against you or whether you should consider registering financing statements against debtors, please contact your lawyer to discuss.