Priority of security interests

When a seller’s assets secure more than one debt, the order of payment matters to the buyer and to any new lender. A registry search can show several registrations against the same assets, and the statute then decides which ranks first. The PPSA search is where the question starts.

The default rules and their exceptions

Ontario’s s. 30(1) applies only if no other provision of the Act applies. Between two interests perfected by registration, order of registration governs; an interest perfected otherwise than by registration is compared by timing as the section sets out. BC’s s. 35 starts the same way: it applies if the Act provides no other method. Other provisions can override the default, such as the PMSI rules in s. 33 of Ontario’s Act, and s. 30(7), which makes a security interest in an account or inventory subordinate to certain deemed trusts, subject to s. 30(8).

What to ask

• Which provision of the governing province’s Act applies to each asset class
• Whether lenders signed an intercreditor agreement or subordination; BC lets a change statement disclose a subordination
• Whether any interest is unperfected, which Ontario’s s. 20 treats differently