RETENTION OF TITLE CLAUSES (ROT clauses) and PPS Register

Prior to 30 January 2012, enforceable ROT clauses were not security interests as title did not pass to the buyer until payment was made. The supplier of the goods remained the owner and third parties with security over the buyer’s assets could not claim them.

Now however, the PPSA makes good the ROT clause as a “purchase money security interest” (PMSI). A PMSI has priority over other security interests but only where the clause has been registered on the PPS Register. The ROT clause must be perfected to be effective. Registration of PMSI’s, for inventory, must be before the buyer takes possession and for other property, within 15 days.

A supplier wishing to retain priority must achieve registration of the PMSI.