PPSA Leasing Glossary Personal Property Security Act (PPSA) The Personal Property Security Act is a provincial statute which provides a public registration system permitting the owners of equipment and vehicles or creditors with rights over equipment and vehicles to register their interest in such assets. There is a PPSA in Alberta, B.C., Manitoba, Ontario and Saskatchewan. The following terms are either derived from definitions contained in the statutes or from general usage in relation to the PPSA. A general glossary of leasing terms can be found in a separate Leasing Glossary. PLEASE NOTE: This document has been designed and compiled as a practical resource to assist those active in the asset-based financing, equipment and vehicle leasing industry in Canada. It does not purport to provide a comprehensive or definitive version of terms and language commonly used in the industry. The CFLA welcomes the suggestion of additional terms or definitions of common use in the business of asset-based financing, equipment and vehicle leasing in Canada. The terms included in this CFLA PPSA Leasing Glossary were drawn from the documentation presented at the following CFLA Professional Development Seminars: Legal Principles for Leasing Blake, Cassels & Graydon LLP PPSA Understanding Lease Registration Jones McCloy Peterson PPSA Understanding Lease Registration Lafleur Brown/Gowling Lafleur Henderson LLP
2 ACCESSIONS Goods that are installed in or affixed to other goods. (Blake, Cassels & ATTACHMENT A PPSA concept which means that (a) value has been given; (b) the lessee has rights in the collateral; and (c) except for the purpose of enforcing rights between the parties to the lease, the security interest becomes enforceable under the PPSA, unless the parties have specifically agreed to postpone the time for attachment in which case the security interest will attach at the time specified in the agreement. The PPSA basically requires that the lessee have signed a security agreement (lease) that contains a proper description of the collateral (the leased property), or the collateral be in the possession of the lessor. The creation of the security interest which happens when value is given, the debtor has rights to the collateral and the security interest is enforceable. It can include after-acquired property and future advances. (Jones McCloy Peterson) COLLATERAL Personal property that is subject to a security interest. As far as lessors are concerned, this will in all likelihood be simply the leased property. (Blake, Cassels & CONSUMER GOODS Goods that are used or acquired for use primarily for personal, family or household purposes. DEBTOR A person who owes payment or other performance of the obligation secured (including a lessee). (Lafleur Brown) Among other things, a debtor may be a lessee under a lease for a term of more than one year; or (b) a person who owes payment or performance of an obligation secured, whether or not that person owns or has rights in the collateral. DEEMED SECURITY INTEREST Any interest to which the PPSA is deemed to apply notwithstanding the fact that such interest does not secure payment or performance of an obligation, and includes, most importantly as far as lessors are concerned, a lease for a term of more than one year. EQUIPMENT Goods that are held by a debtor other than as inventory or consumer goods. FINANCING CHANGE STATEMENT A financing change statement is used to amend the information the financing statement. (See also Financing Statement and Verification Statement). (Blake, Cassels &
3 FINANCING LEASE See Security Lease. FINANCING STATEMENT A financing statement is used to register a security interest/lease in the Personal Property Registry under the PPSA in order to perfect that security interest. (See also Financing Change Statement and Verification Statement). GOODS Tangible personal property, fixtures, crops and the unborn young of animals, but does not include chattel paper, a documentation of title, an instrument, a security, money trees other than until the trees are severed, or minerals or hydrocarbons until they are extracted. INVENTORY Goods that are: 1. held by a person for sale or lease, or that have been leased by that person as lessor; 2. to be furnished by a person or have been furnished by that person under a contract of service; 3. raw materials or work in progress; or 4. material used or consumed in a business. (Blake, Cassels & Generally, goods held for sale or lease. The detailed definition is above. (Jones McCloy Peterson) LEASE FOR A TERM OF MORE THAN ONE YEAR Includes: a lease for an indefinite term including a lease that is determinable by one or both of the parties within one year from its execution; a lease initially for a term of one year or less where the lessee, with the consent of the lessor, retains uninterrupted or substantially uninterrupted possession of the leased goods for a period in excess of one year until the lessee's possession extends for more than one year); and a lease for a term of one year or less where: o the lease provides that it is renewable for one or more terms automatically, at the option of one of the parties or by agreement of all the parties; and o the total terms, including the original term, may exceed one year, but does not include: a lease involving a lessor who is not regularly engaged in the business of leasing goods; a lease of household furnishing or appliances as part of a lease of land where the goods are incidental to the use and enjoyment of the land; or a lease of prescribed kind of goods regardless of the length of the term of the lease. There are presently no such prescribed goods. MOTOR VEHICLE Any mobile device that is propelled primarily by any power other than muscle power in, on or by which a person may be transported and that is designed for use on a road or natural terrain.
4 PERFECTION A PPSA concept created, generally as far as lessors are concerned, when a lessee signs a written lease, value is given, the lessee has rights in the lese property and the "perfects" its interest most likely by registration of a financing statement. More formally, perfection means that the security interest has attached and all steps required for perfection under the PPSA have been completed. This is the doing of all the things necessary to put the security interest somewhere into the priorities sequence. Perfection is achieved by registration of a financing statement in the Personal Property Registry or by possession by the secured party. ( Jones McCloy Peterson) PERSONAL PROPERTY Chattel paper, documents of title, goods, instruments, intangibles, money and securities and includes fixtures but does not include building materials that have been affixed to real property. (Lafleur Brown) PMSI See Purchase Money Security Interest. (Pronounced "Pimm-zee") PPSA The Personal Property Security Act, a provincial statute which provides a public registration system permitting the owners of equipment and vehicles or creditors with rights over equipment and vehicles to register their interest in such asset. There is a PPSA in Alberta, B.C., Manitoba, Ontario and Saskatchewan. PROCEEDS Generally, identifiable or traceable personal property arising from any dealing with collateral. (Jones McCloy Peterson) PURCHASE MONEY SECURITY INTEREST (or PMSI) Includes most importantly, as far as lessors are concerned, the interest of a lessor of goods under a lease for a term of more than one year. It also includes: a security interest taken in collateral to the extent that it secures payment of all or part of its purchase price; a security interest taken in collateral by a person who gives value for the purpose of enabling the debtor to acquire rights in the collateral, to the extent that the value is applied to acquire the rights; and the interest of a person who deliver goods to another person under a commercial consignment, but does not include a transaction of sale by and lease back to the seller and, for the purposes of this definition, "purchase price" and "value" include credit charges of interest payable for the purchase or loan credit. (Blake, Cassels & SECURED PARTY Includes lessors under a lease for a term of more than one year and lessors
5 under a financing lease, but more formally means: a person who has a security interest; a person who holds a security interest for the benefit of another person; the trustee, if a security interests is embodied in a trust indenture. SECURITY AGREEMENT Any agreement creating a security interest; includes all the old forms of security agreements plus leases for a term of more than one year and commercial consignments; substance test important so that if it looks like a security interest, it probably is. (Jones McCloy Peterson) SECURITY INTEREST Includes the interest of a lessor under a lease for a term of more than one year and under a financing lease, but more formally means: an interest in goods, chattel paper, a security, a document of title, an instrument, money or an intangible that secures payment or performance of an obligation, but does not include the interest of a seller who has shipped goods to a buyer under a negotiable bill fo lading or its equivalent to the order of the seller or the order of an agent of the seller, unless the parties have otherwise evidenced an intention to create or provide for a security interest in the goods; and the interest of: (i) a transferee arising from the transfer of an account or a transfer of chattel paper; (ii)a person who delivers goods to another person under a commercial consignment; and (iii)a lessor under a lese for a term of more than one year, whether or not the interest secures payment or performance of an obligation. An interest in personal property that secures payment or performance of an obligation, and includes, whether or not the interest secures payment or performance of an obligation, the interest of a transferee of an account or chattel paper. (Lafleur Brown) SECURITY LEASE [Compare to True Lease] Colloquially means a lease which secures payment or performance of an obligation. Also referred to as "financing lease" or "disguised sale" or "disguise loan". In essence, involves a situation where a sale of goods is structured as a lease to avoid certain legal consequences, including the requirement to register a PPSA financing statement in some jurisdictions (although not British Columbia).
6 SERIAL NUMBERED GOODS A motor vehicle, manufactured home, boat, outboard motor, trailer and aircraft. TRUE LEASE [Compare to Security Lease] Colloquially means a lease which does not secure payment or performance of an obligation, and essentially involves a situation where a lessee is not acquiring leased property through the means of a lease. (Blake, Cassels & VERIFICATION STATEMENT A verification statement is the confirmation delivered by the Personal Property Registry of the registration of a financing statement or a financing change statement. (See also Financing Statement and Financing Change Statement)