Retail

When buying goods—searching the register helps you make an informed decision because you can check whether the valuable goods you want to buy are free from existing financed debt and so safe from repossession.

For example, when buying:

• goods from a wholesaler other than for immediate cash (e.g. buying goods on retention of title arrangements or on consignment)

• vehicles (other than from a licensed motor vehicle dealer).

As a buyer, you will ‘take free’ of security interests that your seller has granted over the collateral, if the property is sold to you in the ordinary course of the seller’s business, if the property is the kind they ordinarily sell.

When selling on retention of title, or if you are hiring or leasing out goods—properly registering can protect your interest should any of your customers not pay when due or go broke, even if the goods or assets are on sold, mixed or installed into other goods by your customer.

If you don’t make a registration on those goods or assets and your customer goes broke before they have fully paid you, your goods may be sold to pay secured creditors first.

If you are not registered, you will probably be an unsecured creditor in an insolvency and may not recover much, if anything, of what you are owed.

If you are leasing, or selling on retention of title or on consignment, you may have a purchase money security interest (PMSI) enabling you to claim super-priority provided you register it prior to delivery to your customer and you claim it as a PMSI on the register.

PPS laws provide increased financing opportunities for retailers.

For example, you may borrow against a broader range of collateral such as stock and other assets (other than land).

You can more readily use debts/invoices owed by your customers to raise upfront finance for your business.

Financiers can view interests registered agains

Priority rules decide which secured party ranks higher and determines who can be paid out first from the collateral.

The main rules are first in time, first in line (an earlier dated registration beats a later one over the same collateral).

An exception to this rule is a PMSI.

If properly registered, a PMSI gives priority over earlier registered security interests over the same collateral, such as a bank with an earlier registered security interest over all of the grantor’s present and after-acquired property.

Even though the bank is first in time, the PMSI holder will jump ahead and be first in line.

Industry examples include:

• if your wholesaler sells you goods on retention of title terms, registration protects the wholesaler’s interest in the goods or proceeds of sale if you do not pay for the goods within the credit period and you on-sell them, install or use them in a process

• if you sell to your customers on retention of title terms with time to pay (a credit period), registration will protect your interest in supplies to that customer, and protect your priority should your customer default on payment or go broke

• you might assign (factor) your invoices (accounts) to a financier who can then register to protect themselves over other claimants to those accounts (eg suppliers of stock to you on retention of title terms, who have registered to protect their interest in the proceeds of sale).