Retention of Title (ROT) is often used in a sale of goods contract to ensure the goods remain under the ownership of the seller until a condition is met, such as full payment is received.
Under the Personal Properties and Securities Act an ROT is called a Purchase Money Security Interest (PMSI).
A properly registered PMSI will have priority over other security interests such as a fixed and floating charge. If you fail to properly register a ROT/PMSI on the Personal Properties and Securities Register (PPSR) you’re at risk of losing your goods in favour of another security interest holder.
Other benefits of registration include minimising the risk that someone else can purchase the goods while you still have ownership.
When registering a PMSI over inventory (which covers most personal property used in business including raw materials) you must register before you hand physical possession of the goods to the purchaser. If you don’t then your registration is not perfected.
A seller PMSI (someone who sells property and retains title) will have priority over a lender PMSI (a financier who lends to purchase specific property and takes collateral in that property only). Therefore if you’re lending part of the money for an asset you should check how the remaining amount is being financed or risk your security interest being subordinate.
Contact Tasman at Hume Taylor & Co in Adelaide today to assist you with preparing contracts for sale of goods and the proper registration of security interests.