Deemed security interest (PPSA lease and consignment)

A buyer who finds a long equipment lease among the seller’s contracts may learn that the PPSA treats the lessor’s interest as a security interest. Check what that means for the lien search and for what the buyer takes subject to. See what registered security a buyer takes subject to and security interest.

What the two Acts say

• Ontario: section 2, subject to section 4(1), applies the Act to a lease or consignment that secures an obligation, and to a lease of goods for a term of more than one year even if it does not. Section 1(1) includes the lessor’s interest in that kind of lease in “security interest”.
• Alberta: section 3(2) applies the Act, subject to sections 4 and 55, to a lease of goods for a term of more than one year and to a commercial consignment, even if neither secures an obligation.
• Both Acts define “lease for a term of more than one year” to reach some indefinite and renewable leases, with exclusions. Read the definition.

What to check or ask

List every equipment lease and consignment, with its term and renewal rights. Ask whether the lessor or consignor registered, and search the registry. This entry covers Ontario and Alberta only; check the rules where you are.