Conveyancing is concerned with the transfer of land and improvements from one owner to another. The doctrine of fixtures means that the improvements on the land are considered by the law to be part of the land and therefore a contract for the sale of real estate simpliciter does not involve the sale of personal property and the Personal Property Securities Act (PPSA) has no application to such a contract.

Vacant land

Subject to what is said below in relation to corporate vendors, a vendor’s response to an inquiry from a purchaser about the PPSA in the sale of vacant land is to simply confirm that the contract does not relate to personal property and the PPSA is not relevant.

Residential sales

However, it is traditional for land contracts to include a provision for the sale, in addition to the land, of chattels – or now, goods – that pass with the land. In the residential context this includes such things as carpets, blinds, light fittings and the like which add no real value to the land but which vendors generally leave upon departure and purchasers, often vehemently, expect will remain with the property. It is estate agents who traditionally complete this part of the contract and, in a rush to make a commission, little care is likely to be taken to distinguish between chattels and fixtures. It is therefore not unusual to find “stove, hot water service and swimming pool pump” listed as goods, whereas they are truly fixtures and not subject to the PPSA.

Items that are in fact goods will almost invariably fall within the exemption in s 47 PPSA that excludes personal or domestic items valued at less than $5000. Therefore, the vendor’s response to a request for release in such circumstances should again be that there is no personal property sold pursuant to the transaction that is subject to the PPSA.

The PPSA may be applicable in contracts for the sale of land that also include the sale of a substantial item of personal property. Generally, this will be in the context of a substantial commercial or industrial property and the parties will be alive to the possible application of the PPSA. In that case the quite complex provisions of general condition 7 of the contract of sale guide the release procedure.

Company charges

Prior to the introduction of the PPSA a charge against an asset of a company could be registered at ASIC (Australian Securities and Investments Commission). These charges were ‘migrated’ to the PPSA. Registration was not limited to personal property owned by the company and could in fact extend to a fixed and floating charge over all of the assets of the company, including real estate. The significance of registration of such interests and the need for their release was recognised in Naval and Military Club v Southraw Pty Ltd & Anor [2008] VSC 593, and it is best to conclude that the safest course of action is to search the PPSA register and insist upon release of such charges.

The purpose of release is to prevent a claim after settlement by a third party claiming an interest under the charge. However once the purchaser is registered as proprietor of the land the principle of indefeasibility will mean that the purchaser takes the property free of any such interest. Therefore, the only concern relates to the period between settlement and registration, during which time the dispute would be between two unregistered interests, the first of which (the charge) would have priority in time. However, the purchaser would be entitled to argue that the chargee was entitled, indeed obliged, to register the charge on the title by way of caveat and failure to do so constitutes postponing conduct.

The chargee might argue that a caveat would only have achieved notice and that the purchaser had notice (or constructive notice) from registration on the PPSA. However, s 300 PPSA specifically provides that registration on the PPSA register is not to be deemed constructive notice so a purchaser who does not search may be in a better position than one who does.

Release

The predecessor to general condition 7 acknowledged the possibility of a letter of comfort in relation to such charges but general condition 7 now only envisages a formal release of PPSA charges. The purpose of release in this context is to overcome ‘notice’ and it would appear reasonable that, should the purchaser search the PPSA register and thereby gain notice of a charge, then obtaining a letter of comfort (as distinct from a formal release) should mean that the secured party would be unable to argue that the purchaser should be subject to the secured party’s interest when comfort has been given by that secured party in respect of that interest.

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This article has interest and relevance for practitioners in all states.

A Personal Property Securities publication is available on By Lawyers.