NEW ZEALAND Law and Practice Contributed by: David Weavers, Jesse Fairley and Matt Consedine, Russell McVeagh
In New Zealand, property is generally classed into two separate asset types: real property (real estate) and personal property (in general terms, all property other than real property) and the systems that govern security interests in each are fundamentally different. Real property is gov- erned by the Property Law Act 2007 (the “PLA” ) and the Land Transfer Act 2017 while personal property is governed by the Personal Property Securities Act 1999 (the “PPSA” ). Real Property A mortgage over freehold or leasehold interests in land (real estate) takes effect as a charge in favour of the secured party (mortgagee) rather than a transfer of an interest in the land charged. A mortgage can be either “equitable” (unregis- tered) or “legal” (registered). Although an all-assets security agreement will create a security interest over both personal property and real property, a registered mort- gage will also be taken where land is a material part of the collateral package. Registration is not mandatory. However, a registered mortgage will have priority over an unregistered mortgage, except where the mortgagee’s conduct was fraudulent in respect of the prior interests. Registration is a largely online process facilitated through Land Information New Zealand (a gov- ernment department). To register a mortgage, both the mortgagor and mortgagee sign pre- scribed forms which authorise their respective solicitors to complete the electronic registration against the relevant properties. Personal Property The PPSA applies to all tangible and intangi- ble property (including shares, bank accounts, inventory etc) other than real property (interests in land) and a limited set of specific types of
personal property (eg, certain aircraft and ships and fishing quotas) which are governed by other regimes. Security over personal property can be taken by an all-asset security deed (which would extend to all personal property and real property owned by the obligor) or a specific security deed (ie, a security deed limited to certain classes of per- sonal property, such as shares, bank accounts or receivables). Financiers in a leveraged context would typically require: • the special purpose vehicle holding company of the bidco to grant specific security over the shares in the acquisition vehicle, its bank account and any receivables owing to it by the bidco and • all asset security to be provided by the bidco and, post-closing, the target and these mem- bers of the target group to grant all-asset security so as to comply with the guarantor coverage test. The security interest will usu- ally operate in relation to both current and future assets as well as any proceeds of the collateral. A security interest “attaches” to personal prop- erty to which the PPSA applies when: • value is given by the secured party ( “value” means consideration that is sufficient to support a simple contract and includes an antecedent debt or liability); • the security provider has rights in the collat- eral (eg, the debtor is the legal owner of the assets subject to the security); and • the security agreement is enforceable against third parties (a security agreement is enforce- able against third parties when the collateral
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