If property is being held and used under a hire-purchase agreement, the owner of the property will have rights under the agreement to reclaim the property in certain circumstances.
The most common cause for repossession is in cases where payments under the agreement have been stopped or delayed. The agreement will usually state that the owner can reclaim the property if the hirer default on payment.
This form of security is different to a mortgage or a security held under the Chattel Securities Act 1987 in that the person making the goods available for hire retains the ownership of the goods until the completion of the agreement.
The effect of this arrangement is that a hirer 'licenses' the goods from the owner until the final payment is made, at which time the hirer becomes the owner.
In this way, an owner supplying machinery or plant and equipment under a hire-purchase arrangement retains all the powers of ownership, except for those granted to the hirer under the agreement.
Generally, hire-purchase arrangements are not covered by the Credit Act 1984. However, hire-purchase arrangements can be brought under the Act, along with the supply of other types of goods.
If the goods supplied are worth less than $20 000 or include a commercial vehicle or farm machinery worth more than $20 000, and the contract states that a hirer has an option to purchase the goods, then the supply may be a 'credit sale contract' for the purpose of the Act. The supply needs to be to a natural person (not a company) and the goods are not to be used wholly or mainly for business purposes.
The debtor under a credit sale contract governed by the Credit Act takes ownership of goods upon delivery or when the contract is entered. The debtor will be seen to have given a mortgage of the goods to the credit provider, who will only be able to repossess the goods in accordance with regulations made under the Credit Act.
If the goods are to be used for business purposes (such as a primary production farm), then the provisions of the Credit Act will not apply, and the hire-purchase provisions outlined above will take precedence if the arrangement meets the hire-purchase definitions.
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