Australian associations introduce cross hire agreement

The Hire and Rental Industry Association (HRIA) and Elevating Work Platform Association (EWPA) in Australia have produced a Cross Hire Agreement (CHA) to help protect members from risks associated with recent legislation.

The new CHA confronts the legal issues between rental companies allowing sub-hire that arise in Australia's PPSA (Personal Properties Securities Act), which came into effect 1 February, 2012. The agreement complements the existing Master Agreement, already available to association members.

The PPS Act essentially requires all personal property in Australia to be registered on the national PPS Register to protect ownership or to mitigate title over the item.

Phil Newby, Chief Executive Officer of the HRIA said: “Under the PPSA, the interest of a hire business that allows its customer to sub-hire is dependent on the steps the customer takes to protect itself.

“The equipment can be lost because of matters beyond the control of the hire business if the customer on-hires and doesn’t look after the interest in the equipment,” Mr Newby said.

“This adds a new level of risk that can't be effectively controlled by hire businesses. Since the inception of the PPSA, this has led to a loss of confidence between some hire businesses. The introduction of the association driven CHA will however, provide instruction and a measure of protection for hire businesses hiring equipment that may be used for sub-hire.

“Of course members must ensure all hire agreements are checked by their own legal team to make sure it effectively covers their specific type of business.”

Mr Newby also reminded members and the industry as a whole that the transitional protection period since the introduction of the PPS Act is coming to an end.

He highlighted a recent court decision (Maiden Civil Case) which confirms hire businesses are vulnerable to loss of equipment if they do not perfect their interest by registration.

“This case involves the issue of transitional protection and confirms there are gaps and exceptions in the legislation. The majority of members will only have a small proportion of their rental fleet still out on hire relating to equipment hired out prior to 30 January, 2012. It is worthwhile for members to check what is still on hire and get legal advice on what to do to ensure it is covered under the PPSA.

“All other rentals that have occurred since the start of the PPS Act will be covered by Master Agreements, but of course, only if members have implemented Master Agreements,” Mr Newby said.

“The PPSA brings particular risks in relation to cross hire. For example: An owner hires a mixer to a hirer for 13 months and perfects the security interest by (PPSR) registration against the hirer. The hirer then sub-hires to a user for 12 months and 28 days. If the hirer does not also perfect the security interest by registering against the user on the PPS Register, the owner’s rights to the mixer may be lost if the user wrongfully sells it or if the user becomes insolvent. If both the user and hirer are insolvent the owner may sustain an absolute loss,” Mr Newby said.

Developed conjointly with HRIA and EWPA legal advisor Bartier Perry the CHA is available online at the HRIA and EWPA web pages for members only: www.hireandrental.com.au or www.ewpa.com.au