Equitable Liens and Priority

The author of the following article, Steve Flynn, has generously shared this with us.

It deals with the two notable recent New Zealand High Court decisions on Tiny Homes and Podular Housing. Please feel free to reach out to Steve Flynn, Special Counsel at Simpson Grierson, if you would like to discuss this further.


Two recent, and already notorious, New Zealand High Court decisions – Tiny Town and Podular
Housing – have held that purchasers under uncompleted contracts for the construction and
sale of custom-built, small, residential buildings have equitable liens over ‘their’ buildings, to the
extent of the purchase money paid.

These decisions are notable for a number of reasons, including that they:

are the first instances in New Zealand of equitable liens being found to exist in such circumstances;

have upset long-held understandings as to the position of purchasers in an insolvency, and operate contrary to the pari passu principle;

have complicated the application of the Personal Property Securities Act 1999 (PPSA) in respect of security over goods;

are likely to have implications beyond their particular facts, and have the potential to be applied in a wide range of situations; and

raise difficult questions as to what priority such equitable liens have, as regards other interests in the same goods.

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