PPSR – When leasing commercial property, landlords typically require some form of security from tenants – often in the form of a cash security deposit or a bank guarantee. These are intended to protect the landlord against tenant defaults, unpaid rent, damage to the premises, or breaches of the lease agreement.
However, many landlords don’t realise that not all forms of security provide equal protection – especially when it comes to the Personal Property Securities Register (PPSR). A failure to understand and comply with the PPSR regime can leave landlords vulnerable, particularly if a tenant goes into insolvency. This article explains the risks and how to mitigate them.
What Is the PPSR?
The Personal Property Securities Register (PPSR) is a national online register of security interests in personal property (excluding real estate). Introduced under the Personal Property Securities Act 2009 (Cth), it allows creditors and parties with security interests to register their claims against personal property (such as goods, stock, vehicles, or even security deposits) to ensure their interests are recognised and enforceable – especially in insolvency scenarios.
PPSR – The Common Security Options in Commercial Leasing
1. Bank Guarantees
A bank guarantee is a commitment by a financial institution to pay the landlord a specified amount if the tenant defaults. It is typically:
- Unconditional and irrevocable;
- Not impacted by the tenant’s insolvency;
- Not considered a personal property security under the PPSA;
- Not subject to registration on the PPSR.
✅ Key Advantage: Bank guarantees offer strong protection because they sit outside the tenant’s assets and are not affected by a liquidator’s claims.
2. Cash Security Deposits
A cash security deposit is money paid by the tenant to the landlord and held as a form of security. While this might appear straightforward, it carries significant risk if not properly structured and registered.
If the landlord holds the deposit in their own account and the lease refers to it as “security for obligations,” it could be treated as a security interest under the PPSA. If so, it must be registered on the PPSR.
❌ If the landlord fails to register on the PPSR, and the tenant becomes insolvent, a liquidator may be entitled to reclaim the deposit under insolvency laws. The landlord is then treated as an unsecured creditor – often left with little to nothing.
PPSR Risk in Action: An Example
A landlord accepts a $50,000 cash security deposit under a commercial lease. The lease terms say the deposit is security for the tenant’s obligations. The landlord keeps the funds in their general account. The tenant later goes into liquidation.
Because the deposit was not registered on the PPSR as a security interest, the liquidator claims it. The landlord loses the deposit and must lodge a claim as an unsecured creditor.
This risk could have been avoided by registering the landlord’s interest on the PPSR.
Best Practices for Landlords
To ensure your security is truly secure, landlords should:
✅ Prefer bank guarantees where possible
- They offer greater protection and are not subject to PPSA rules or PPSR registration.
✅ If using a cash security deposit, register it on the PPSR
- Ensure lease documentation clearly defines it as a security interest.
- Promptly register the interest on the PPSR in accordance with the legislation.
- Consider using a solicitor to prepare or review lease documentation to ensure compliance.
✅ Review lease documentation
- Many leases have poorly worded or ambiguous clauses relating to security deposits.
- An effective lease should clearly define the nature of the security and comply with PPSA requirements.
✅ Keep cash deposits in a separate, designated account
- Avoid mingling the funds with your general accounts.
- This strengthens the argument that the funds are held on trust and reduces the risk of clawback in insolvency.
The Legal Bottom Line
The PPSR regime has added complexity to what were once straightforward leasing practices. For commercial landlords, failing to understand the PPSA and the registration requirements can have costly consequences – particularly when tenants face insolvency.
Landlords must take proactive steps to ensure any security interest they hold – especially cash security deposits – is properly structured and registered. By doing so, you maximise your chances of recovery and avoid being left out-of-pocket.
Need Help Protecting Your Interests?
At Swanwick Murray Roche, we advise landlords and property managers across Queensland on all aspects of commercial leasing, including the correct use of bank guarantees, security deposits, and PPSR compliance.
If you’re unsure whether your lease arrangements comply with the law—or you simply want peace of mind that your security is enforceable – get in touch with our team today.
The information in this article is correct as at the date of publication – 27 May 2025. This is general guidance only and not legal advice, ensure you seek legal advice for your circumstances and please do not rely on this article.