Until recently, I have interpreted Section 4(f) of the Manitoba Personal Property Security Act (the "MPPSA") to mean that:
(i) where you are dealing with an assignment of all of a lessor's rights and interests under one or more land leases (including the right to rentals), the MPPSA does not apply, and that instead, one "perfected" by filing a caveat against the relevant land at the Land Titles Office; and
(ii) where you are dealing with a "pure" assignment of rents (ie, none of the lessor's rights under the lease except for its right to claim payment of rentals), the MPPSA does apply and that one perfected by first filing a financing statement in the PPR, and thereafter, based on that PPR filing, one filed a MPPSA (Rentals) Notice against the relevant land at the Land Titles Office.
Now I am not so sure. Three matters trouble me:
(a) if a security assignment of all of a land lessor's rights under a lease includes - as it surely does - the lessor's entitlement to payment of rentals, isn't is arguable that with the rentals (among other things) being assigned, the MPPSA does apply, so that the secured party should - in addition to whatever else it does - file a financing statement and an MPPSA (Rentals) Notice? In other words, file a financing statement and an MPPSA (Rental) Notice for both an assignment of rents and leases and a "pure" assignment of rents.
(b) if the argument in (a) above is correct, does it necessarily follow that where you have an assignment of rents and leases, the secured party should additionally file a caveat (to give notice of the security assignment to it of the lessor's rights and interests other than the entitlement to the payment of rent? Are the lessor's rights under one or more leases, other than its entitlement to payment of rentals, interests in land at all? I believe that the answer is "yes", at least with respect to some of the tenant's covenants and undertakings under a lease. So a caveat should be additionally registered. Also, future accruing rentals are probably land interests, so registration of a caveat is probably justified for this reason alone.
(c) there appears to be an ambiguity in the wording in Section 4(f). That is:
(i) Section 4(f) first says that "the transfer of a right to payment that arises in connection…a lease of land" is not covered by the PPSA; and
(ii) thereafter, it provides an exception (which of course means that the PPSA does apply) for "a transfer of rental payments payable under a lease of land…".
What is the difference between "a right to payment that arises in connection with the lease of land" and "rental payments payable under a lease of land"?
Perhaps the only safe practice when dealing with a security assignment of all of a land lessor's rights under a lease (including the lessor's right to receive rents) is to do all three of making a PPR financing statement filing, filing an MPPSA (Rentals) Notice against the title to the relevant land and additionally filing a caveat against such title. At least until this matter is clarified either by the Courts or preferably, by the Legislature.
In preparing this paper, the writer wishes to acknowledge the valuable input of his legal colleagues Wells Peever, Q.C., Len Weinberg, Q.C. and ProfessorArt Braid, Q.C.