PPSA or Personal Property Security Act In The Philippines
Republic Act or RA No. 11057 also referred to as the Personal Property Security Act (PPSA) is an important law for establishing, monitoring, and registering security from personal properties in the Philippines.
According to this law, the government will ensure that the proper steps are taken in regard to the collection of funds from real estate collaterals for any public or private use. It was enacted, amended, and signed into law on August 18, 2018, as announced by the Department of Finance, with the aim of improving the efficiency of government programs by restructuring the way the process of security and collateral works.
Agencies Behind RA No. 11057
The Philippine Department of Finance operating with the Philippine Department of Justice is in charge of circulating and implementing the rules and regulations surrounding the PPSA in cooperation with the Philippine Land Registration Authority (LRA). This law seeks to protect the rights of citizens over their private properties and credit collections.
The Philippine Land Registration Authority is launching a central electronic notice registration platform, which seeks to give electronic ways for searching and registration of notices. The government will also provide assistance to public sector banks when it comes to debt settlements. However, during the development of this electronic registration from the date that the PPSA has become effective, existing laws will continue to apply.
The Objective of the PPSA
PPSA aims to spur economic activity by promoting accessibility to credit with the lowest exposure to personal property, particularly for micro, small, and medium enterprises (MSMEs). It will provide a much more secure and legal transactions in the Philippines with the introduction of a centralized notice registry to properly enforce interests in security over personal properties.
According to this law, the personal property of the borrowers can be transferred from private sector banks to government agencies or financial institutions without completely losing their rights of property. In addition, under RA No. 11057, public sector banks will provide services such as debt settlement to all the borrowers in the country if the government deems it necessary.
The amount that the government will transfer to the borrower will include any income tax paid as well as any charges that were paid on loans, such as interest and penalties. However, it will be specified how much the government will provide to each individual, the size of the property that the borrower has, and the tenure during which the borrower has the property.
Creditors May Dispose of Collaterals Without Judicial Process
A secured creditor may now dispose of or sell the land collateral either publicly or privately. It is important to note on Section 47 under Expedited Repossession of the Collateral, that the secured creditor may take possession of the collateral without judicial process if the security agreement so stipulates. Provided that the possession can be taken without a breach of the peace.
Borrowers Have To Settle Debt Balances
Meanwhile, it is also mandatory for the borrower to fulfill any deficiency left of the credit. Previously, the laws in the Philippines recognizes that the foreclosure of a property automatically extinguishes any unfulfilled debt. And that the secured creditor has no means to collect or recover any of the remaining financial deficiency. This is no longer the case.
Intellectual and Other Movable Properties
Under the Personal Property Security Act (PPSA) as guided by the Civil Code of the Philippines, intangible properties also know as movable properties such as receivables and intellectual property rights can also be leveraged as collateral for loans. Registrable collateral may encompass shares of stock, bank cheques, negotiable instruments, negotiable documents of title, consumer goods, motor vehicles, store inventory, deposit accounts, livestock, equipment, receivables, intellectual property rights, future property or after-acquired assets, and related properties.
However, as of the moment, the PPSA cannot include aircraft and ships because they are mandated under different sets of laws. Aircraft as collateral falls under the Civil Aviation Authority Act of 2008, while ships as collateral will be under the Ship Mortgage Decree of 1978.
Real Estate As Traditional Collateral
Before the enactment of the RA No. 11057, banks and other lending institutions prefer traditional assets such as buildings, land, real estate, and other immovable properties as collaterals because there is already an accepted standard of registration for titles. The nature, scale, and the size of these immovable properties make them ideal candidates for enforcing any security made against them.
Electronic Registry for Security Notices
The Personal Property Security Act will correct the old tradition by working with the Philippine Land Registration Authority to promote a centralized electronic registry platform to evaluate and monitor notices of security interests and liens in personal properties from both movable to immovable assets.
More importantly, the PPSA is encouraging a unified set of rules in processing and enforcing security interests in both movable and immovable properties. Any parties wishing to enter loan agreements may only need to observe simple and straightforward steps, such as the following:
- A written agreement signed by both parties
- State the description of the collateral and arrangement
- To file and register the security interest notice with the electronic registry to specifically state the status of possession of the immovable property or the control of the account if the collateral is an investment property
These electronic records will be treated as public records and will be free of charge for the digital searches of the registry records or for the enrollment of termination notices.
PPSA and the Property Business In The Philippines
If you are a small to medium business looking for other access to financing by using personal property or movable assets as collateral to generate additional capital, then the Personal Property Security Act may ease any tension instilled by traditional arrangements to offer a much more secure and legal avenue to look into.
The government is also working on creating special specific guidelines for more complex credit negotiations. Landowners into the property development business can now better secure design and construction funds from idle lands by virtue of the promulgation of the PPSA or RA No. 11057. With the right master plan and project design, the early selling of the unit inventories would quickly aid in dissolving any outstanding credit balances without the usual fear of foreclosure.
How do you think the Personal Property Security Act can help you with your business? What type of sellable or rentable projects can you do with your property if you had the funds for them? Please drop your comments below. If you need to consult architectural strategies for your property ventures in the Philippines, please feel free to get in touch.
