The recent Court of Appeal decision of Marac Finance Limited and O’s v M J Greer (CA220/2011) concerned the priority over rental income between, on the one hand, the holder of a perfected security interest under the Personal Properties Securities Act 1999, and on the other hand, the first-ranking mortgagee over the leased properties who also had a perfected, but second-ranking, security interest under the PPSA.
The key question was whether the PPSA applied to rental income, and the application of the exclusion in section 23 of the PPSA. It was noted that the earlier High Court judgment had considered the nature of the securities granted (by their documentation) and the posing considerations behind the PPSA and the Land Transfer Act 1952. The agreement that the transfer by way of security of the interest in the rent was not excluded by section 23(e)(ii) of the PPSA. The High Court decision, based on the position that the priority over the rental income should be governed by the Land Transfer Act and not the PPSA, was therefore applied in the Court of Appeal. Landlords should not therefore enjoy a false sense of comfort merely by relying solely on a first-ranking PPSA interest.