Enforcing your security interests

If you have a security interest, you can take steps to enforce it in some circumstances. This may allow you to claim collateral from the grantor to cover all or part of the debt it secured. Consider the situation where you supply goods to a customer on written terms; if this gave you a security interest and your customer stopped paying, you may be entitled to take the goods back.

If the grantor goes bankrupt or insolvent, you can claim your rights under the security interest through the insolvency practitioner.

For more information, see our guide about External administration of a grantor.

If you decide to take enforcement action, there are some steps you need to follow. This page provides general information only. Always consider legal advice on your own situation before taking any enforcement action.

When enforcement rights apply

PPS laws give you rights to enforce a security interest. Even if your contract with the grantor says nothing about enforcement, these rights still apply.

Generally you have the right to enforce your security interest (e.g. repossess your goods) if the grantor defaults on the agreement. Being able to enforce these rights in practice depends on how and when you made the PPSR registration, especially if your security interest is a purchase money security interest.

For more information, see Is my security interest a PMSI.

When the enforcement rules under PPS law don’t apply

Some or all of the enforcement rules under PPS law may not apply in some cases including:

• you’ve agreed with the Grantor in a contract that they don't (note that you can't do this if the collateral is mostly for personal, domestic or household use) or
• your security interest is a PPS lease or commercial consignment (unless it also meets the definition of standard security interest).

When there’s another secured party

If more than one secured party has a security interest in the same property, there are rules about who has priority. See Priorities and rankings.

The secured party with the highest priority also has the highest claim to the collateral. This means they can seize it from a lower priority secured party who has started enforcement action first.

General rules

You can only get what you're owed

If you enforce a security interest, you can only use the collateral (e.g. sell it) to get back the amount you’re owed, plus legal costs. You can’t take any more than this. The grantor and other secured parties are entitled to any amount left over.

Follow the PPS laws

You must comply with PPS law on enforcement costs, notices to be given (e.g. to the grantor) and accounts to be kept. See How you can enforce your interest below for more information and refer to the Forms page for a copy of these notices.

Seek legal advice

Always get your own legal advice if you’re thinking of taking action to enforce a security interest. This is a complex area and it's likely you will need someone to look at your personal situation and provide you with specific advice as to what action to take.

The first step to enforce your interest is to seize the collateral from the grantor. How you do this will depend on the type of collateral.

• For goods or other tangible property – seize the goods. You must use a lawful method to do this.
• For intangible property (such as a bank account or a patent) – give a notice of seizure.

Once you have seized the collateral, you have a number of options.

Sell the collateral

You can choose to sell it to cover the amount owed to you.

Before the sale, you must give notice to the grantor and any higher priority secured parties.

The price you sell for must be market value or a reasonably obtainable amount.

The sale ends any security interest in the collateral. The sale amount goes to the secured parties in order of priority, up to the amount they’re owed. Any leftover amount goes to the grantor.

Keep the collateral

An alternative to selling the collateral is to keep (retain) it. This means that ownership transfers to you and any security interest in it ends.

To do this, you need to give notice to the grantor and anyone else with a registered security interest. If any other secured party objects, you won’t be able to keep the collateral.

Redeem the collateral

Before you sell or take ownership of the collateral, the grantor can ‘redeem’ it. They do this by paying the full amount owing to you, plus your enforcement expenses. They will then own the collateral and take it back from you.

Any other secured party also has the option to redeem the collateral.

Reinstate the security agreement

Before you sell or take ownership of the collateral, anyone can reinstate the security agreement. They do this by paying the overdue amount to you, plus your enforcement expenses.

The agreement then continues as if there had been no default. This means you return the collateral to the grantor and they keep making the agreed payments.