NEW ZEALAND Law and Practice Contributed by: David Weavers, Alex MacDuff, Matt Consedine and Verniel Virtucio, Russell McVeagh
5.6 Release of Typical Forms of Security Real Property A mortgage over real property can be released by the secured creditor signing a one-page instruction form authorising legal counsel to effect a release of the mortgage via the LINZ online platform. Legal counsel will then effect the release on the platform. Personal Property Security over personal property is released by the secured creditor signing a short release deed (two- to-three pages). The secured creditor usually arranges for any related PPSR registrations to be discharged within a few days after the release is effective. 5.7 Rules Governing the Priority of Competing Security Interests and/or Claims New Zealand recognises that multiple security inter - ests may be granted in the same asset. With respect to real property, the priority of security interests will generally be determined by the order of registration on the title. With respect to personal property, the rules for priority of competing security interests and claims are set out in the PPSA. The general rules provide that: • a perfected security interest has priority over an unperfected security interest in the same collateral; • if competing security interests are all perfected, then priority will usually be given to the secured party that was the first to either register a financing statement or take possession of the collateral. However, there are specific priority rules within the PPSA which override these general rules. An exam - ple is purchase money security interests (PMSIs). A PMSI generally arises where the secured party gives value for the purpose of enabling the debtor to acquire the collateral (eg, a security interest taken in collat - eral by a seller to secure the obligation to pay the collateral’s purchase price, such as retention of title arrangements). A PMSI is given “super priority” status provided that the secured party perfects its security interest within the relevant time period specified in the PPSA.
The PPSA also provides for rules of priority of inter - ests (other than security interests) in collateral. For example, a third-party purchaser of shares has prior - ity over a perfected security interest in those shares if the purchaser gave value, acquired the shares without knowledge of the security interest, and took posses - sion of the shares. For this reason, financiers typically take possession of any shares forming part of the col - lateral package. The PPSA expressly recognises that a secured party may subordinate its security interest to any other inter - est and the New Zealand courts will also uphold con - tractual subordination provisions. 5.8 Priming Liens and/or Claims See 5.7 Rules Governing the Priority of Compet- ing Security Interests and/or Claims in relation to competing interests under the PPSA, such as PMSIs. Lenders will typically permit these arrangements to arise in an uncapped amount (as they generally arise under necessary supply arrangements to the borrow - er), so long as they are entered into in the ordinary course of business. Liens arising by operation of law are also excluded from the application of the PPSA and will therefore trump a lender’s security. 5.9 Cash Pooling and Hedging/Cash Management Obligations Private credit lenders will typically permit a borrower to maintain bank accounts with a local bank and to enter into transactional banking facilities, such as overdrafts, hedging and letters of credit. A lender typi - cally acknowledges that a transactional bank may be able to pool cash and set off that cash against over - drafts and other indebtedness owing to them. Rather than have the transactional bank agree otherwise, lenders will instead tightly control the amount any of indebtedness that can be entered into with transac - tional banks. Where a transactional/hedge bank requires security, they will typically rank super senior to the senior pri - vate credit lender (sharing the same security pool). 5.10 Appointment of Collateral Agent New Zealand law recognises and permits a security trustee to hold security interests on behalf of a group
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