An unfortunate reality of current economic pressures is that construction contractors are being wound up or forced into administration due to cash flow issues.

What then happens to the deposit paid by a body corporate to a contractor who is about to be wound up?

Regrettably, many bodies corporate will not be aware that they have lost their deposit until such time as the contractor stops returning calls or emails and does not show up to the jobsite.

Where there are competing claims for the return of a deposit, if the body corporate has not taken a step to have their deposit recognized, that deposit sitting in the contractor’s bank account, ends up being paid to the contractor’s other registered creditors.

That sad fact is, without taking a step to protect their deposit for works and work in progress, the body corporate will lose any ability to compel a liquidator/receiver to recognize the deposit as owing to the body corporate.  

So, what can bodies corporate do to protect their deposit and/or work in progress sitting in a contractor’s yard?

This is where the Personal Properties Securities Register  (“PPSR”) comes in.

The PPSR is essentially a public notice board onto which, parties that have entered into a credit arrangement by which they:

a.         loaned another party money for the purchase of a piece of personal property that is not real estate; or

            b.         paid another party a deposit for works; or

            c.          borrowed a piece of equipment from another party; or

            d.         have advanced materials/goods as a credit to another party; or

            e.         undertook works (e.g. car repairs) for another party;

can protect their interest in that money, piece of equipment, credit or works by advertising the existence of the credit arrangement to the public (who pay a fee to inspect the notice board).

The PPSR exists to protect to prospective asset buyers (and prospective creditors dealing with company assets as part of a liquidation or company wind-up) to ensure transparency in terms of who has an interest in a company’s assets and for what type of interest under previous credit arrangements.

By posting their interest onto the PPSR, bodies corporate secure a priority in terms of debts being paid out where assets fall short of liabilities.

It is worthwhile for every body corporate to check, prior to, handing over their deposit, whether it’s worthwhile to register their interest on the PPSR.

You can find more information here: https://www.ppsr.gov.au/?gad_source=1&gclid=EAIaIQobChMIopmhj6qMhwMVfqpmAh0nWgtgEAAYASAAEgKCJ_D_BwE&gclsrc=aw.ds