Lessons Learned - Lesson Six: Getting Sub-Leasing Right - Common And Costly Errors Can Be Avoided

Cassels Brock developed this Lessons Learned series based on our experience with priority disputes between secured creditors and the realization that many secured parties make fundamental errors of law that cause them to lose priority in their collateral. Each lesson in the series will outline a basic mistake and the lesson to be learned...

Lesson Six: Getting Sub-Leasing Right - Common and Costly Errors can be Avoided

Below is an example that we have seen on more than one occasion.

Finance Company A finances trucks for LeaseCo who then leases these trucks to a third party Customer. Finance Company A makes all applicable registrations under the Personal Property Security Act (the PPSA) to ensure its first priority position in the trucks as against LeaseCo. The Customer has a bank operating line with Finance Company B and has entered into a general security agreement in favour of Finance Company B who duly registered and has a first priority security interest