Leases of Goods are now subject to the Personal Property Security Act (Ontario) (“PPSA”)


By
Robert Krizman
August 6, 2007

If you are now or may in the future be engaged in leasing goods or personal property (ie. not real estate) to another person, then we would like to make you aware of a recent amendment to the PPSA which relates to leases of goods for a term of more than one year.

Effective August 1, 2007, the PPSA will apply to “leases for a term of more than one (1) year” which includes:

1. a lease of more than one year;

2. a lease for an indefinite term, even if one of the parties to the lease can terminate it within one year;

3. a lease for a term of one year or less if the lease is renewable and the total term of the lease including the renewal term is longer than one year;

4. a lease for a term of one year or less if the lessee, with the consent of the lessor, retains uninterrupted or substantially uninterrupted possession of the goods for more than one year, but only when the possession does exceed one year;

Please note that the changes to the PPSA will not apply to leases of goods of more than one year where:

1. the lessor is not regularly engaged in the business of leasing goods; or

2. a lease of household furnishings or appliances as part of a lease of land, if the use and enjoyment of the household furnishings or appliances is incidental to the use and enjoyment of the land.

Previously the PPSA only applied to leases which secured payment of an obligation (ie. financing/security leases) and did not apply to true leases. With the introduction of these changes, effective August 1, 2007, the PPSA will now apply to leases for a term of more than one year, even if the lease is a true lease. This amendment will bring the PPSA in line with the laws which are currently in effect in many of the other provinces in Canada.

This amendment to the PPSA means that, effective August 1, 2007, if you are leasing goods to another person for a term of more than one year, then that lease must be perfected by a registration under the PPSA. Please note that timing of a PPSA registration is important in determining priority of a person’s interest in the leased goods and, accordingly, we would suggest that you speak with legal counsel to ensure that you register your interest in the leased goods in a timely manner.

Please note that this is just a brief summary of the recent changes to the PPSA relating to leases of goods for a term of more than one year. Please contact Robert Krizman at the co-ordinates below for further information on these changes.