The Ontario Personal Property Security Registration (PPSR) System is a notice filing system that records and provides information concerning consumer and business loans where goods and other personal property are used as collateral to secure loans. The PPSR System is a provincial system and each province and territory would have its own PPSR System.
For example, a person (“Borrower”) buys a large screen TV and borrows money from a loan company (the “Lender”) to pay for the TV. The Borrower and the Lender enter into an agreement giving the Lender the rights to the TV until such time as the Borrower has paid the money back to the Lender. The Lender would register a Personal Property Security Registration against the Borrower to secure its loan to the Borrower.
Who Should Register in the Ontario Personal Property Security Registration System
Persons involved in one of two types of transactions would make a registration in the Ontario Personal Property Security Registration System: (1) Creditors who secure payment of a debt by taking a security interest in the personal property of the debtor should register a financing statement under the Personal Property Security Act (Ontario) (frequently referred to as the “PPSA”); or (2) persons who repair or store an article and who, prior to receiving full payment give up possession of that article, should register a claim for lien under the Repair and Storage Liens Act (frequently referred to as the “RSLA”).
Registering in the PPSR System helps to establish priorities between individuals with competing interests in the same personal property, and in the case of a claim for lien will ensure that the non-possessory lien is enforceable against third parties. Information is kept current through the registration of a financing change statement. For instance if any information changes about the property, the lender or the borrower, a financing change statement can be filed to update the information.
What is the Registration Process
Lenders and borrowers must enter into what are called “security agreements”. The Lender registers a notice of the agreement in the PPSR System. This is done by completing and submitting a document electronically called a financing statement. This must be done by an online service such as a search house. This registration is done by the Lender because it is the Lender who wants to protect its interest in the security.
The information is then recorded on the PPSR System and remains there until such time as the PPSA registration has been discharged by the Lender.
It is not just loan companies that can register a PPSA. If you have loaned money to a person you can have this individual sign a promissory note or a security agreement and you can then register a PPSA financing statement against that individual. You do not have to have a solicitor prepare this document for you but it is always the best route.
What Information is Included in the PPSA Financing Statement
In the case of a consumer car loan this would include the borrower’s name, address and date of birth, the lender’s name and business address, the registration period, classification of the collateral as consumer goods, initial amount of the loan, maturity date and description of the car including motor vehicle identification number (VIN).
Even though only a summary of the information can be registered, it is important to have complete information. For instance, having the first name, middle name and last name of the debtor is better than just the first and second name. Consider the name “John Smith” which is very common. If you were to do a search of this name through the PPSR System you would get results for more than one person. However, if you register the name “John Abbot Smith” the search results would be more narrow. Including the date of birth is another way of ensuring specific information about the debtor. Further describing the security is important. For instance, describing the security as a TV would not be as good as saying that it is a Sony 30 inch flat screen TV with Serial Number: 29845. There is a box on the form which will allow you to put in a description of the security which is 2 or 3 lines long. Take advantage of this opportunity.
How Long is the Information Retained in the PPSR System
Lenders must select the time period for the registration. Business loans may be registered for as long as 25 years, or for a perpetual period. The longer the time period, the more money it is to register a PPSA. In the case of consumer loans, lenders can register only for up to five years at a time but the PPSA registration can be renewed for a further five years. The onus would be on the lender to ensure it re-registers at the appropriate time.
How Does a PPSA Registration Become Discharged
When the consumer loan is repaid the lender is required to register a “discharge” within 30 days. Frequently this is not done so if you are the borrower you should ensure that this is done on your behalf by the lender.
Even if the borrower has paid the lender all of the money that he or she owes to the lender, the borrower should not discharge the PPSA registration on his or her own. The borrower should contact the lender and request that the PPSA registration be discharged.
What Should You Do if the Lender Does not Discharge the PPSA Registration After All Payments Have Been Made
Where the secured party (in this situation the lender), without reasonable excuse, fails to register the financing change statement, or certificate of discharge or partial discharge, or all of them, as the case may be, required pursuant to the Personal Property Security Act (Ontario) within 10 days after receiving a demand for it, the secured party shall pay $500 to the person making the demand (in this case the borrower) and any damages resulting from the failure. The sum and damages are recoverable in any court of competent jurisdiction.
If no discharge is registered the PPSA registration will remain on the system until the end of the registration period.
Why Should You Do a Search Before Buying a Used Product
Before buying a used car or other used goods, consumers should do a PPSA search to protect themselves financially. For example, a search may indicate that the seller or a previous owner has obtained a loan and that the seller may not have full rights in the used car that the consumer wants to buy. A PPSA search might ascertain that there is an outstanding amount still owed against the used car. It may be that this loan is paid off already but the discharge has not been done. If so, the search results will enable the consumer to contact the seller to confirm whether or not the loan taken out by the seller is still in effect, and to obtain further details. If the loan has been repaid but there is still a PPSA registration on file respecting the loan, the buyer should insist that the seller to promptly register a discharge before the sale is completed. However, if there is an outstanding loan, the consumer may either decide against completing the sale or require the seller to arrange for payment of the loan as well as registration of the discharge. It would be a terrible situation for you if you were to buy a used car and later find out that a bank loan was outstanding regarding that vehicle and that you do not actually own it at all.
If the seller has rights in the used car and a search is not done, the car could later be seized if the buyer fails to repay the loan. A PPSA search is not required when buying a new item such as a car.
What Information is Required to Do a Search Against a Business Name
The legal name of the business must first be determined. If the business is a corporation, the incorporated name should be searched, i.e. 279482 Ontario Inc. In the case of a partnership a search should be done against the partnership name. If a company or business carries on business under a trade name, such as 279482 Ontario Inc. operating as Joe’s Used Car Sales, the search must also be done under the business name. It is important that you know the exact and proper name of a company or business before you do a search otherwise your search may not provide you with the proper information. If you have any concerns about whether you have an accurate name of a company Resources for Canadian Business Owners may be able to help you with this as a free service. Contact us and we will see what we can find out for you prior to you performing a PPSA search.
What Information is Needed to Search Against an Individual’s Name
There are two types of individual PPSA name searches when searching an individual’s name. You may request that either an individual specific or an individual non-specific be done.
You must supply the first given name, initial of second given name (if any), surname and date of birth of an individual to do an Individual Specific Search. This information should be verified against an official document such as a birth certificate, change of name certificate or certificate of Canadian citizenship. The search is called “Specific” because you have specific information about this person beyond his or her first and last names. You might have a birth date and/or a middle name.
A Non-Specific Search requires only the first given name and surname. This search should be done when a consumer does not know the individual’s date of birth or the initial of the second given name or wants to lessen the risk of missing a registration due to error. Sometimes a registration might be done against an individual by their first and last name and at other times by their first, second and last name. Therefore sometimes doing a non-specific search will give you wider results and thereby not miss the registration you are looking for. Keep in mind though if the name is common you could wait a few weeks to get the results since if the number of pages of the search is extensive the search results have to be mailed rather than pdfed to you by email.
The results for both types of searches will disclose only registrations that set out the exact name (and birth date for a specific search) which is searched.
The search results are provided in pdf form unless the search criteria is so vague the results are too expansive. For instance if you search John Smith it is possible to get 50 pages back from the government and this would have to be mailed. There would also be a time delay with this type of search.
How to Change Information on a Registered PPSA Financing Statement
It is possible to register a financing change statement in order to amend or update a registered PPSA financing statement.