What notice does a purchase-money security interest holder have to give other secured creditors?

For a purchase-money security interest to get its special super-priority over an earlier-registered general security interest, the PMSI holder generally has to do more than simply register — for certain types of collateral, particularly inventory, Ontario's Personal Property Security Act generally requires the PMSI holder to give written notice to other secured parties who have already registered against the same type of collateral, before the debtor takes possession of the new goods.

This notice requirement exists because inventory financing arrangements are common, and an existing general lender with security over a corporation's inventory needs a way to know that a new PMSI is coming in and could take priority over part of that inventory. For collateral other than inventory — such as equipment — this specific advance-notice step is generally not required in the same way, though registration formalities still need to be met properly and promptly. Because missing this notice step can mean losing the PMSI's super-priority entirely and falling back to ordinary priority rules, suppliers and lenders relying on PMSI financing for inventory should confirm the current notice requirements carefully before extending credit.