Purchase Money Security Interest
A particular type of security interest created under the Personal Property Securities Act, a PMSI generally receives priority over a standard security interest.
As defined by Section 14(1) of the PPSA, a PMSI – Purchase Money Security Interest includes any of the following:
- A security interest taken in collateral, to the extent that all or part of its purchase price is secured;
- A security interest taken in collateral by a person who gives value for the purpose of enabling the grantor to acquire rights in the collateral, to the extent that:
- The value is used to acquire those rights;
- The interest of a lessor or bailor of goods under a Personal Property Securities (PPS) lease; or
- The interest of a consignor who delivers goods to a consignee under a commercial consignment
This essentially means that a PMSI is different to other security interests in two important ways – first, in the manner in which it is created, and secondly, in the priority that it receives over other interests in the same collateral. It is a security interest, or claim on a property, that gives a lender who provides the financing to acquire the goods or equipment with a priority ranking ahead of other secured creditors, who have a more standard security interest.