… The PPSA Decoded: The Unsung Law Behind Every Commercial Mortgage Deal
When it comes to commercial mortgages, most people think about property appraisals, rent rolls, or debt service ratios. But behind the scenes, there’s another piece of the puzzle that quietly keeps lenders and borrowers playing fair—the Personal Property Security Act, or PPSA.
It’s not the flashiest part of commercial financing, but it’s one of the most important. The PPSA is the backbone of how lenders in Canada secure their interests in a borrower’s personal property—the movable assets of a business. It’s the law that ensures everyone knows who owns what, who owes who, and who gets paid first if things go sideways.
Let’s break down what the PPSA is, how it works in the world of commercial mortgages, and why understanding it can save you or your clients a world of grief when structuring or closing a deal.
Topics I’ll Cover
What the Personal Property Security Act (PPSA) Is
Why It Exists and What It Does
How the PPSA Works in Commercial Mortgage Lending
What Gets Registered Under the PPSA
Priority: Why “Who Registers First” Matters
A Real-World Story: The Case of the Competing Creditors
How Realtors and Clients Can Use This Knowledge
What the Personal Property Security Act (PPSA) Is
The Personal Property Security Act (PPSA) is provincial legislation that governs how lenders register and enforce security interests in personal property—that is, anything a business owns that isn’t real estate.
Each province in Canada has its own PPSA (e.g., Ontario, Alberta, British Columbia), but they all follow the same general principles. It’s the commercial equivalent of the land registry system—but instead of tracking ownership of land, it tracks security interests in things like equipment, inventory, accounts receivable, and other business assets.
Think of it as a giant online notice board that tells the world, “Hey, this lender has a claim on this company’s stuff.”
Why It Exists and What It Does
Before the PPSA existed, lenders had to rely on a confusing mix of old laws and court precedents to secure their loans against business assets. It was messy and inconsistent.
The PPSA changed that. It introduced a standardized, transparent system that:
- Allows lenders to register their security interest in a borrower’s assets.
- Establishes the priority order of who gets paid first if the borrower defaults.
- Provides public access to those registrations, so other lenders and creditors can check what’s already pledged.
In other words, it keeps the lending world honest. No one can quietly pledge the same assets to multiple lenders without being found out.
How the PPSA Works in Commercial Mortgage Lending
In a commercial mortgage, the lender typically takes two kinds of security:
- A charge or mortgage on the real property (the land and building).
- A General Security Agreement (GSA) on the borrower’s personal property.
Once the GSA is signed, the lender registers a PPSA filing against the borrowing corporation. This filing records their claim to the company’s personal property—like the equipment, furniture, leases, and receivables tied to the property or business.
The PPSA registration acts as a legal timestamp. It tells other potential lenders, “We were here first.”
If another creditor later tries to lend against the same assets, they’ll see that registration and know their position would be second (and therefore riskier).
What Gets Registered Under the PPSA
Under a typical commercial mortgage, a lender’s PPSA registration might cover:
- All present and after-acquired personal property, meaning everything the business owns now and everything it acquires in the future.
- Specific classes of collateral, such as inventory, machinery, or accounts receivable.
- Assignments of leases and rents, when the property generates income.
For example, if a lender finances a retail plaza owned by a corporation, they may take security not just on the land but also on:
- The lease agreements with tenants,
- The cash held in rent accounts, and
- Any business assets owned by the corporation.
It’s comprehensive by design—because the lender is securing an income-producing business, not just a piece of dirt.
Priority: Why “Who Registers First” Matters
In the world of the PPSA, timing is everything.
If two lenders both have security interests in the same assets, the one who registered first (chronologically) usually has priority. That means they get first claim on proceeds if the assets are sold or liquidated.
For example:
- Lender A registers a PPSA on a company’s assets on January 1.
- Lender B registers a similar PPSA on February 1.
If the borrower defaults, Lender A gets paid before Lender B—no exceptions.
That’s why commercial lawyers and mortgage professionals are meticulous about registering the PPSA the moment a deal closes. Missing that window could mean losing priority and, ultimately, losing money.
A Real-World Story: The Case of the Competing Creditors
A few years ago, I worked with a small industrial property owner in Ontario who took out a commercial mortgage with a credit union. The loan included both a property mortgage and a GSA over their business assets.
Unbeknownst to the borrower, they also had a line of credit with another lender that had its own PPSA registration—one that predated the new mortgage. When the business hit a rough patch, both lenders tried to claim the same assets.
Guess who won?
The first lender—the one who registered earlier—had priority. The credit union, despite holding the mortgage, had to stand in line behind them for any proceeds from the personal property.
That situation taught my client (and me) an important lesson: PPSA priority can make or break a lender’s recovery—and it can absolutely shape how a deal is structured.
How Realtors and Clients Can Use This Knowledge
If you’re a realtor, this knowledge helps you:
- Recognize why commercial closings take longer—especially when multiple creditors or lenders are involved.
- Spot potential red flags if a property-owning corporation has existing PPSA registrations (which might affect financing).
- Speak confidently with lenders about how PPSA filings fit into the financing structure.
If you’re a borrower or investor, understanding the PPSA means you can:
- Avoid double-pledging assets that are already encumbered.
- Monitor your corporation’s PPSA registrations online (each province has a searchable registry).
- Structure new loans strategically—knowing how to protect your position if multiple lenders are involved.
For example, if you’re refinancing a commercial property, clearing or subordinating an old PPSA registration might be required before the new lender will advance funds.
Allen’s Final Thoughts
The Personal Property Security Act may not get much attention, but it’s one of the most vital tools in commercial lending. It provides order in a system that could otherwise descend into chaos, ensuring every lender knows where they stand—and every borrower knows what they’ve pledged.
Understanding the PPSA isn’t just about legal compliance; it’s about protecting your deal, your business, and your reputation.
As your mortgage agent, my job is to help you navigate these details—to work with lenders and lawyers to make sure your PPSA registrations are properly managed, your priorities are protected, and your deal closes cleanly.
Because in commercial real estate, success isn’t just about getting the financing—it’s about securing it smartly. And that’s where I come in.
