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Priority rules


Under the Personal Property Securities Act 1999 the general rule for priority of financing statements is outlined in Section 66 where:

  • A perfected security interest has priority over an unperfected security interest in the same collateral 
  • Priority between perfected security interests in the same collateral (where perfection has been continuous) is determined by the party who perfected first (either by registration or possession).


Read our glossary definition of perfection.

Note | This information is intended as a guideline - you should obtain your own independent legal advice.

Exceptions to the priority rules

The most common exception to the priority rules set out in Section 66 is where a Purchase Money Security Interest (or PMSI) exists.  Where a PMSI exists it will have a 'super priority' over a general security interest in the same collateral.  A PMSI may exist in the following situations:

  • A security interest taken in collateral by the seller.  For example, 
    • A hire purchase agreement relating to the purchase of a television or 
    • a supplier providing the goods on the basis that they retain the title until the goods are paid for.  Sometimes referred to as a 'Romalpha clause'. 
  • A loan by a bank for the purchase of a car where the loan is secured by the car, and the proceeds are applied towards the car’s purchase.


When does a PMSI arise?

For a PMSI to exist you must perfect your security interest as you would for a non-PMSI, with the exception that you must register your financing statement within certain time periods depending on the type of collateral.  These include:

  1. Inventory - If the collateral is inventory, you must register a financing statement before the debtor takes possession of the goods.
  2. Intangible – If the collateral is an intangible, the financing statement must be registered within ten workings days after the security interest attached. 
  3. Other types of collateral (not inventory or an intangible) – you must register a financing statement within ten working days after the debtor takes possession of the collateral.


When searching on the PPSR, it is not possible to identify if a PMSI exists in a financing statement.  It is also not possible when registering a financing statement to indicate on it that the secured party has a PMSI.  Any disputes in relation to who has priority over particular collateral may be resolved by legal proceedings.


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Link New Zealand Legislation
Last updated 22 May 2009


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