Most business owners believe that property they own is property they keep. In Canadian personal property law that has not been reliably true for nearly two decades, and the businesses most exposed are usually the ones least likely to have taken advice: suppliers who lease, consign or finance rather than lenders who lend.
Key Takeaway
Under the provincial Personal Property Security Acts, priority to personal property no longer turns on common law notions of title or ownership but on compliance with the statutory rules governing perfection. Since a 2007 amendment, any lease of more than one year must be registered to maintain priority, and true leases over one year, commercial consignments and transfers of an account or chattel paper are deemed security interests whether or not they were intended to secure anything. A perfected interest beats an unperfected one, and among registration-perfected interests priority follows order of registration regardless of order of perfection. A purchase-money security interest can leapfrog an earlier general security agreement, but only if perfected within fifteen days of the debtor obtaining possession for non-inventory collateral, and at or before possession for inventory. The Alberta Court of Appeal's 2025 decision in Royal Bank of Canada v Patterson Dental Canada Inc confirms that registering against the wrong debtor is functionally equivalent to not registering at all.
The Displacement Of Ownership
The conceptual shift underlying everything else in this article is stated compactly in the commentary: priority of entitlement to the value of the property interest no longer turns on common law notions of title or ownership but on compliance with the provisions of the PPSA governing perfection of security interests[1].
That sentence describes a genuine break with intuition. In ordinary commercial thinking, the person who owns a thing controls what happens to it, and someone who lends against it obtains rights derivative of the owner's. The PPSA regime substitutes a public registry: what matters is what was registered, when, and against whom.
The rationale is coherent and worth stating fairly. A creditor deciding whether to lend to a business needs to know what claims already exist against that business's assets. Ownership is invisible; a leased forklift and an owned forklift sit side by side on the same floor. A registry makes claims discoverable, which reduces the cost of credit for everyone by removing a category of unknowable risk.
The cost of that design falls on parties who hold real ownership and do not register, because the system treats their unregistered ownership as invisible in exactly the way it was built to prevent. That is not a defect. It is the mechanism working as intended, and it is why the sections below focus on suppliers rather than lenders.
The 2007 Lease Amendment
The single change most likely to catch a Canadian business, and the one with the least awareness.
Commentary describes the history: for decades there was confusion over leases of equipment and other movables. If the lease was a form of financing it had to be registered under the PPSA to maintain the seller-on-credit or lender's priority regardless of who the owner might be under the lease terms, which led to uncertainty as lenders argued over whether a lease was a true lease or a form of purchase financing. Under a true lease, since the supplier always owned the equipment, the other creditors or a trustee in bankruptcy could not sell it. In 2007 the PPSA was amended to require any lease of over one year to be registered to maintain priority[1].
The commentary characterises the reform as a "a lease is a lease" approach that reduces confusion in managing an insolvency, while acknowledging the result may seem harsh[1].
Follow the consequence precisely, because it is the article's central warning. A business that leases equipment to a customer for a term exceeding one year, and does not register, has not merely lost a priority contest with another creditor. If the customer becomes insolvent, the equipment the supplier owns outright may be available to the customer's creditors. The supplier's ownership does not protect it, because ownership stopped being the operative question.
The population exposed is broad and mostly non-financial: equipment dealers offering rental-to-own terms, technology providers placing hardware with customers, service businesses that install and retain title to apparatus, and any supplier whose commercial arrangement leaves its property in a customer's hands for more than a year.
The Three Deemed Security Interests
The lease is one of three arrangements the statute captures despite no one intending to create security.
Academic commentary identifies them: there are certain types of transactions not designed to secure the performance of an obligation that are nonetheless deemed by the PPSA to be security interests, including true leases of more than one year, commercial consignments, and the transfer of an account or chattel paper[2].
Each captures a common Canadian commercial arrangement.
Commercial consignment. A manufacturer places inventory with a retailer, retains title, and is paid when the goods sell. Nothing was borrowed and nothing was secured. If unregistered, the consignor's goods may be exposed to the retailer's creditors.
Transfer of an account or chattel paper. This captures receivables factoring and the sale of instalment contracts. A business that sells its receivables has, for PPSA purposes, created a registrable interest, and a factor that fails to register is in the same position as an unregistered lender.
True leases over one year. As above.
The unifying feature is that in each case a party retains real economic rights in property or receivables held or collected by another, and in each case the statute requires that arrangement to be made public. The intention behind the transaction is irrelevant, which is why "we never took security" is not an answer.
Attachment And Perfection
The two-stage mechanism, because the vocabulary is used loosely and the distinction determines outcomes.
A security interest is perfected when it has attached and all steps required for perfection under the Act have been completed, where "all steps" means possession or registration, and this operates regardless of the order in which those events occur, so pre-registration is effective[3]. Security interests in all types of property can be perfected by registration of a financing statement, subject to the attachment requirement[3]. Possession is available where collateral is capable of possession, though it is not favoured because the debtor cannot then use the collateral[3].
Attachment generally requires value to have been given, the debtor to have rights in the collateral, and a signed security agreement or possession or control of the collateral, with no postponement of attachment[4].
The consequence of failing to perfect is direct: a perfected security interest has priority over an unperfected security interest[3].
Two practical points follow. Pre-registration being effective means a secured party can register before the security agreement is signed or before funds advance, which is standard practice in lending and is worth knowing when a search reveals a registration that seems to predate any transaction. And registration alone does not create rights: without attachment there is nothing to perfect, so a registration against a debtor with no security agreement is an empty entry.
For collateral classes such as investment property and electronic chattel paper, control rather than registration may be the superior method[4], and one Ontario commentary notes that registration is the workhorse but not the only relevant method, and in some collateral classes it is not the winning method[5].
The Baseline Priority Rules
The Ontario formulation, which is representative of the common law provinces though readers should check their own statute.
Under section 30(1), if no other provision applies: priority between security interests perfected by registration is determined by the order of registration regardless of the order of perfection; between a registration-perfected interest and an interest perfected otherwise than by registration, priority turns on which occurred first; between two interests perfected otherwise than by registration, priority turns on the order of perfection; and between two unperfected interests, priority turns on the order of attachment[5].
The first limb is the one to internalise. Between two registered parties, the order of registration governs, not the order of perfection and not the order in which the money was advanced. A lender that registers today and lends next year outranks a lender that lent last month and registered tomorrow.
The same commentary draws the operational conclusion: this is why small administrative failures in registration, continuation, or collateral description can carry very large economic consequences in secured lending disputes[5].
That sentence deserves weight. The economic stake in a priority dispute is often the entire recovery, and the determining fact is frequently clerical: a date, a spelling, a description, a renewal. Few areas of commercial law convert administrative error into total loss so directly.
Future Advances And The Lapse Trap
Two refinements that matter disproportionately in practice.
Section 30(3) provides that where future advances are made while a security interest is perfected, the security interest has the same priority for each future advance that it has for the first advance, subject to the specific exception in section 30(4). Section 30(6) deems a security interest that becomes unperfected and is again perfected by registration to have been continuously perfected, subject to the conditions in the provision[5].
The future advance rule is why a general security agreement supporting a revolving facility is powerful: each new advance inherits the priority date of the original registration rather than taking a fresh, later date. A lender in first position stays in first position as it lends more.
The lapse rule is the mirror image and the more common failure. PPSA registrations have finite terms and require renewal. A registration allowed to expire leaves the interest unperfected, and while section 30(6) provides relief where it is re-perfected, that relief is subject to conditions and should not be relied on as a substitute for calendar management.
The practical instruction for any secured party is that registration expiry dates belong in an institutional diary, not in a lawyer's file. For a business that has taken security from customers, the diary is its own responsibility and nobody else will monitor it.
The Purchase-Money Security Interest
The exception that makes equipment and inventory financing possible, and the reason the first-to-register rule does not foreclose all later lending.
The problem the PMSI solves is structural. A business granting its bank a general security agreement over all present and after-acquired personal property has, in effect, pledged everything it will ever own. Under the baseline rule, a supplier financing a new machine two years later would rank behind the bank on that machine, because the bank registered first. No supplier would extend that credit.
The PMSI reverses the ordering for the specific asset whose acquisition the new credit financed. A perfected PMSI in goods other than inventory has priority over a conflicting security interest in the same goods, and a perfected interest in identifiable proceeds also has priority, if the PMSI is perfected within the statutory window after the debtor receives possession[6].
The policy is that a creditor whose money brought the asset into the debtor's estate should have first claim on that asset, since the earlier general creditor's position is not prejudiced by an asset that would not otherwise exist. That reasoning is why the super-priority is confined to the financed collateral and its proceeds rather than extending across the estate.
Fifteen Days, And Zero For Inventory
The deadline that decides whether the super-priority exists at all.
The Manitoba formulation illustrates the structure: perfection is required, in the case of inventory, at the date the debtor or another person at the debtor's request obtains possession of the collateral, whichever is earlier; and in the case of collateral other than inventory, not later than fifteen days after the debtor or another person at the debtor's request obtains possession[2].
Two features are commonly missed.
For inventory there is effectively no grace period. The interest must be perfected by the time the debtor obtains possession, which means registration has to precede or coincide with delivery. A supplier that ships first and registers on receipt of paperwork has lost the super-priority on that shipment.
For other collateral the window is fifteen days from possession, not from invoice, not from contract signature, and not from payment. Possession is the trigger, and in a transaction where equipment is delivered before documents are finalised, the clock is already running while the parties negotiate.
We note that grace periods and their precise formulation vary across the provincial statutes, and comparative material shows other regimes using different periods for analogous provisions[7]. A supplier operating in several provinces should not assume a single number applies everywhere, which is a recurring theme in this article.
Missing the window is not fatal to the security interest itself. It is fatal to the super-priority. The interest remains valid and falls back to the ordinary rules, where a prior registered general security agreement will outrank it, which is precisely what happened in the decision discussed below.
When Two PMSIs Collide
A refinement that matters where both a vendor and a lender financed the same acquisition.
Where more than one security interest qualifies for PMSI priority in the same collateral, a security interest securing an obligation incurred as all or part of the price of the collateral has priority over a security interest securing an obligation incurred for value given to enable the debtor to acquire rights in or the use of the collateral[7]. In the Manitoba PPSA, subsection 34(7) provides that a non-proceeds purchase-money security interest has priority over a purchase-money security interest in the same collateral or proceeds where the timing conditions are met[2].
The distinction is between the seller who supplied the goods on credit and the lender who advanced money to buy them. Where both qualify, the vendor's price-based interest generally outranks the lender's enabling-loan interest.
For a business this matters when equipment is acquired with a combination of vendor terms and bank financing, and both parties believe they hold first position on the asset. They may both hold a PMSI, and the ordering between them is determined by the statute rather than by their expectations or by their agreements with the debtor.
Patterson Dental: The Wrong Debtor
A 2025 appellate decision that illustrates two failures at once, and the most instructive recent Canadian authority in this area.
In Royal Bank of Canada v Patterson Dental Canada Inc, 2025 ABCA 391, Dr. Faissal Mouhamad obtained financing from RBC for his dental clinic, Faissal Mouhamad Professional Corporation, of which he was the sole director and shareholder. As security for the loan, FMPC granted RBC a security interest in all of its present and after-acquired personal property, and RBC perfected in 2016[8].
The Court of Appeal upheld Patterson's priority and emphasised that ownership and the identity of the debtor are decisive when determining whether a creditor's security interest extends to contested assets. It rejected RBC's argument under section 51 of the PPSA, clarifying that the provision only preserves a perfected security interest in transferred collateral. Because Dr. Mouhamad personally owned the equipment, RBC's corporate security over FMPC did not attach, except for loyalty credits used in the purchase. Although Patterson had registered its interest after the fifteen-day window for PMSI super-priority, the residual priority rules favoured the first to register against the correct debtor, being Dr. Mouhamad[8].
Two lessons, and they point in opposite directions.
RBC held a properly perfected general security agreement and lost, because the equipment belonged to the individual rather than to the corporation that granted the security. Security attaches only to property in which the debtor has rights, so a security agreement from the wrong entity secures nothing however carefully it was perfected.
Patterson missed its PMSI window and still won, because it had registered against the correct debtor and no one else had. The super-priority was lost; the interest was not. That is the fallback described above operating in a claimant's favour.
The Debtor Name Problem
Generalising from Patterson Dental to the error businesses actually make, offered as our own analysis.
The decision turned on the identity of the debtor, and identity errors are among the most common and most consequential registration failures. They take several forms.
Registering against an operating company when the asset is owned by a holding company or by an individual, which is the Patterson Dental pattern and is endemic in owner-managed businesses where personal and corporate property are not carefully separated. Registering against a trade name or business style rather than the legal name of the entity. Registering against a legal name that is materially misspelled, since registries index by name and a search against the correct name may not surface a defective registration. And failing to re-register following an amalgamation, continuance or name change.
The economic asymmetry is severe. Verifying a debtor's exact legal name against a corporate registry search takes minutes and costs almost nothing. The consequence of getting it wrong is the loss of the entire security position, as RBC's experience illustrates.
For a business taking security from customers, our recommendation is a standing rule: obtain the customer's articles or a corporate profile report before registering, register against the legal name exactly as it appears there, and confirm which entity actually owns or will own the collateral rather than assuming it is the entity you contracted with.
Choice Of Law Has Stopped Being Uniform
A development that undermines a assumption most businesses still hold, and it deserves more attention than it receives.
The Alberta Law Reform Institute explains the position. If the PPSAs of all Canadian jurisdictions point to the same registry, a secured party can easily ascertain where to register to achieve perfection, and anyone dealing with the debtor can identify the registry to search. Conversely, if different jurisdictions adopt different choice of law rules, confusion, error and uncertainty are likely to result: secured parties may find their security interests unperfected because they registered in the wrong place, and searching parties may find their interest subordinated[9].
Critically, that uniformity no longer exists. Until recently the choice of law rules in all Canadian PPSAs were virtually the same, so registering and searching parties could readily ascertain where to register or search and litigation outcomes would be the same regardless of where within the common law jurisdictions the dispute was heard. Some provinces have since moved to adopt different rules, and the Alberta PPSA applies the law of Alberta where that is the location of the chief executive office[9].
The Institute states the resulting exposure plainly: a security interest may be perfected if the dispute is litigated in Alberta but unperfected if litigated in Ontario, or vice versa[9].
For a business extending credit or leasing equipment across provincial lines, the practical implication is that determining the correct registry is now a legal question rather than an administrative one. Registering only in the province where the goods are delivered, or only where the supplier is located, may be wrong. The safest practice, and one that costs little relative to the exposure, is registering in every plausibly relevant jurisdiction rather than resolving the choice of law question definitively.
Quebec Is A Different System
A boundary condition worth stating explicitly.
The provincial PPSAs are common law statutes. Quebec operates under the Civil Code, where security over movable property takes the form of a hypothec and registration occurs in a separate provincial register rather than a PPSA registry.
The concepts are analogous in function and different in structure, terminology and requirements. Nothing in this article about attachment, perfection, PMSI windows or PPSA priority rules should be applied to Quebec property or Quebec debtors without Quebec-specific advice.
For a business operating nationally this is not a footnote. It means the compliance exercise has two distinct workstreams, and a national supplier that has built a careful PPSA registration process may have no equivalent process for its Quebec transactions at all.
The Search Obligation
The other side of the registry, which businesses use far less than they should.
The registry exists to make claims discoverable, and its value to a searching party is symmetrical with its value to a registering one. A business acquiring equipment, purchasing assets out of another business, or extending significant credit can search the registry against the counterparty's legal name and see what is already claimed.
Three situations where a search is warranted and often omitted. Buying used equipment from another business, where an existing registered interest may follow the asset. Acquiring a business by way of asset purchase, where the assets acquired may be subject to registered interests and the transaction should address discharges. And extending trade credit at a level material to the supplier, where knowing whether a general security agreement already covers the customer's assets tells you what your practical recovery would be.
Searches are inexpensive and fast. Their absence from routine commercial process in most small and mid-sized Canadian businesses is, in our assessment, one of the larger unforced risks in ordinary trading, and it is the cheapest item on the list at the end of this article.
A Worked Case: The Supplier Who Owned Nothing
A Canadian equipment supplier places specialised machinery with a manufacturing customer under a three-year lease, retaining title throughout. The reconstruction illustrates the mechanism rather than reporting a specific engagement.
The supplier's view is straightforward: it owns the machine, the lease says so, and if the customer stops paying it will collect its property. Nothing was borrowed and no security was granted, so registration never arose as a question. The lease was drafted by a commercial lawyer years earlier as a template and has been used unchanged since.
The customer's bank holds a general security agreement over all present and after-acquired personal property, perfected several years before the machine arrived. The customer becomes insolvent.
Because the lease exceeds one year, it is a deemed security interest and required registration to maintain priority[1]. Unregistered, the supplier's interest is unperfected, and a perfected security interest has priority over an unperfected one[3]. The supplier's ownership under the lease does not answer the question, because priority no longer turns on common law notions of title[1].
Had the supplier registered before delivery it would have held a PMSI in non-inventory collateral, perfected within the required window, ranking ahead of the bank on that machine and its identifiable proceeds[6]. The registration would have cost a nominal fee and a few minutes.
The transferable point is that the supplier's exposure was created not by a financing decision but by a sales decision, made by people who had no reason to think of the PPSA at all.
What To Do
Identify every arrangement that leaves your property or receivables with someone else. Leases over a year, consignments, and sales of accounts or chattel paper are deemed security interests regardless of intent.
Register before delivery, not after. Inventory PMSI priority requires perfection by the time the debtor obtains possession, and the non-inventory window runs fifteen days from possession rather than from invoicing or payment.
Verify the debtor's exact legal name from a corporate registry search. Patterson Dental turned on debtor identity, and registering against the wrong entity is equivalent to not registering.
Confirm which entity actually owns the collateral. In owner-managed businesses, equipment is frequently held personally while contracts are signed corporately.
Diarise every registration expiry institutionally. A lapsed registration is an unperfected interest, and the continuous-perfection relief is conditional.
Register in every plausibly relevant province. Choice of law rules are no longer uniform, and an interest can be perfected in one jurisdiction and unperfected in another.
Treat Quebec as a separate workstream. Hypothecs and a different register, with different requirements.
Search before you buy used equipment, acquire assets, or extend material credit. It is inexpensive, fast, and rarely done.
Take advice if you might be a supplier who must register. The commentary's own recommendation, and the population most at risk is the one least likely to have a lawyer involved in routine sales.
The Limits Of This Analysis
Several caveats matter, and this area is unusually technical. The PPSA is provincial legislation and the statutes are not identical; section numbers, grace periods, choice of law rules and deemed interest definitions vary, and the provisions cited here draw variously from Ontario, Manitoba and general commentary, with one comparative citation drawn from a United States Uniform Commercial Code enactment rather than a Canadian statute and used only to illustrate the duelling-PMSI ordering principle. Readers must work from their own province's Act. We report Patterson Dental from a legal summary rather than the judgment, and the summary is partly truncated in the source; the decision should be read directly before being relied on. The Alberta Law Reform Institute material on choice of law is drawn from a reform report and may not reflect current enacted rules in every province. Quebec's civil law regime is noted but not addressed. This article does not cover enforcement and realisation, seizure procedures, the interaction with the Bankruptcy and Insolvency Act, deemed trusts for unremitted source deductions and GST/HST which can outrank secured creditors, receivership, or the specific rules for serial numbered goods, motor vehicles, crops, fixtures, accessions or investment property. Nothing here is legal advice; obtain provincial counsel before relying on any registration position.
Frequently Asked Questions
I own the equipment. Why would I need to register?
Which arrangements count as security interests?
How is priority determined between two registered lenders?
What is the PMSI deadline?
What does Patterson Dental establish?
Does one registration cover all of Canada?
References
- Weilers LLP. (2024, May 7). Perfection of Leases Under the PPSA, on the history of true lease confusion, the 2007 amendment requiring registration of leases over one year, and the displacement of common law title by PPSA compliance. weilers.ca/2024/05/07/perfection-of-leases-under-the-ppsa
- Manitoba Law Journal. (2012). Duelling Purchase-Money Security Interests under the PPSA: Explaining the Law and Policy behind Section 34(7), Volume 36 Issue 1, via CanLII, on deemed security interests including true leases over one year, commercial consignments and transfers of accounts or chattel paper, and on the timing conditions in subsection 34(7). canlii.org/en/commentary/doc/2012CanLIIDocs272
- University of New Brunswick. Security Interests in Personal Property: The PPSA, course materials, on attachment and perfection under sections 19, 24 and 25, the effectiveness of pre-registration, and the rule that a perfected security interest has priority over an unperfected one. siebrass.ext.unb.ca/Comm/Part 1I.ppt
- Practical Law Canada, Thomson Reuters. PPSA: Creation, Perfection and Priority of Security Interests (ON), on attachment requirements, methods of perfection including control, and the treatment of investment property and electronic chattel paper. ca.practicallaw.thomsonreuters.com/4-618-9526
- Mills & Mills / MELaw. (2026, April 28). Priority Disputes Between Secured Creditors in Ontario, on the section 30(1) baseline rules, the future advance rule in section 30(3) and its exception, the continuous perfection deeming rule in section 30(6), and the consequences of administrative failures. melaw.ca/white-papers-and-news-priority-disputes-secured-creditors
- Uniform Commercial Code as enacted in Louisiana, R.S. 10:9-324. Priority of Purchase-Money Security Interests, on the general PMSI priority rule and its extension to identifiable proceeds. Note: a United States enactment, cited only to illustrate the general structure of PMSI priority; Canadian readers must work from their provincial PPSA. legis.la.gov/legis/Law.aspx?d=74425
- Uniform Commercial Code as enacted in Louisiana, R.S. 10:9-324(g). Conflicting Purchase-Money Security Interests, on the priority of an interest securing the price of collateral over one securing an enabling loan. Note: a United States enactment cited illustratively; grace periods and ordering differ across Canadian provincial statutes. legis.la.gov/legis/Law.aspx?d=74425
- Mondaq. (2026, January 8). Alberta Court of Appeal Clarifies PPSA Priorities in Insolvency Sales, reporting Royal Bank of Canada v Patterson Dental Canada Inc, 2025 ABCA 391, on the decisiveness of ownership and debtor identity, the rejection of RBC's section 51 argument, the failure of attachment, and Patterson's residual priority despite missing the fifteen-day PMSI window. Note: a secondary summary; the judgment should be read directly. mondaq.com/canada/insolvencybankruptcy/1728796
- Alberta Law Reform Institute. Personal Property Security Law, Final Report 116, on the benefits of uniform choice of law rules, the loss of that uniformity, the Alberta chief executive office rule, and the risk of an interest being perfected in one jurisdiction and unperfected in another. alri.ualberta.ca/wp-content/uploads/2021/09/FR116.pdf
This article discusses provincial personal property security legislation and is provided for general informational purposes. It is not legal advice. The PPSAs differ by province; section numbers and grace periods vary. Two citations are United States enactments used only to illustrate general PMSI structure. Quebec operates a separate civil law regime not addressed here. Obtain provincial counsel before relying on any registration position.