What Is a Romalpa Clause (Retention of Title) in Australia?

If you sell goods on credit, a Romalpa clause (also called a retention of title clause) can be the difference between getting paid and wearing a loss when a customer goes under.

It’s a simple idea: you keep ownership of the goods until you’re paid in full. But in Australia, the Personal Property Securities Act 2009 (PPSA) changes how these clauses work - you generally need to register your interest on the Personal Property Securities Register (PPSR) to make the clause bite against other creditors.

In this guide, we’ll break down what a Romalpa clause is, when to use one, how it interacts with the PPSR, what to include in your terms, and the practical steps to put strong protections in place.

What Is A Romalpa Clause?

A Romalpa clause is a term you put in your supply contract or terms of trade that says you retain title (ownership) of goods until your customer pays you in full. It’s named after a UK case, Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd, but the concept is now common in Australia.

In practice, a retention of title clause helps you:

• Reduce credit risk when supplying goods on account.
• Preserve the right to recover or deal with unpaid goods.
• Improve your standing in an insolvency - if your interest is perfected under the PPSA.

It’s important to understand that, under the PPSA, a retention of title clause is treated as a “security interest”. That means it’s not enough to just include the wording in your contract - you generally need to perfect that security on the PPSR to get priority over other creditors.

When Should Small Businesses Use A Romalpa Clause?

If you supply any physical goods on credit (even short payment terms), you should seriously consider a Romalpa clause. Common examples include:

• Wholesale suppliers delivering inventory to retail customers.
• Manufacturers selling parts or materials that are installed or processed by the buyer.
• Trades and construction businesses providing materials before receiving full payment.
• Equipment suppliers or hire businesses (often alongside other security arrangements).

Let’s say you sell $20,000 in components to a customer on 30-day terms. Two weeks later, they enter voluntary administration. Without a strong retention of title clause and PPSR registration, you could be in the same bucket as unsecured creditors, hoping for a few cents in the dollar. With a properly structured and perfected clause, you’re in a much stronger position to recover goods or proceeds.

A Romalpa clause doesn’t operate in a vacuum, though. It should sit within robust Terms of Trade or a tailored supply agreement that also covers pricing, delivery, risk, liability, warranties and default consequences.

How Do Romalpa Clauses Work With The PPSA And PPSR?

Under Australian law, a retention of title clause creates a security interest. To make that interest enforceable against third parties and to rank ahead of competing claims, you generally need to “perfect” the security - most commonly by registering it on the PPSR.

Core PPSR concepts to know

• Security interest: An interest in personal property that secures payment or performance of an obligation. A retention of title clause is one example.
• Perfection: The legal step that gives your security interest priority against others, usually via registration on the PPSR.
• PMSI (Purchase Money Security Interest): A special type of security interest that can give you “super-priority” if you register it correctly and on time.

For suppliers of inventory, a correctly registered PMSI can put you ahead of many other secured creditors in respect of the unpaid goods. Timing is critical - PMSIs over inventory typically must be registered before delivery.

If you’re new to PPSR, start with the basics of what the PPSR is and why PPSR matters for your business. When you’re ready, you can get help to register a security interest correctly and on time.

Romalpa + PPSR in practice

• Register early, register right: For inventory, aim to register your PMSI before you supply the goods. For other categories (like equipment), different timing may apply - get advice.
• Describe collateral accurately: Your registration must match the goods category and details. Errors can make your registration ineffective.
• Proceeds and mixed goods: Consider clause wording that extends to proceeds of on-sale and deals with commingled or manufactured goods (e.g. where your nuts and bolts go into a machine).
• Beyond ROT: Some suppliers also take an “all-assets” or specific-charge security (for broader coverage) via a General Security Agreement, in addition to Romalpa wording.

Without PPSR perfection, a retention of title clause often won’t beat other secured creditors in an insolvency. The PPSA system is technical, so it’s worth getting set up properly from the start.

What Should A Good Romalpa Clause Include?

Your retention of title clause should be clear, comprehensive and integrated with your commercial terms. While the exact drafting depends on your business and products, strong clauses typically address:

• Title retention: You retain ownership until all amounts owed for the goods (and sometimes all amounts under the account) are paid in full.
• Risk and insurance: Risk may pass on delivery, with the customer responsible for insurance while you still own the goods.
• Segregation and identification: The customer must store your goods separately, keep them identifiable, and not remove labels.
• On-sale terms: If the customer on-sells the goods before payment, you have rights to the proceeds (held on trust) and to trace those proceeds.
• Access and recovery rights: On default, you can enter the customer’s premises to identify and recover unpaid goods, without liability for trespass (to the extent permitted by law).
• Mixed/manufactured goods: If goods are used in manufacturing or commingled, you may have a charge over the end product up to the value of your unpaid goods.
• PPSR cooperation: The customer agrees you may register and maintain PPSR registrations and must do what’s necessary to enable perfection (including signing documents).
• Default events and remedies: Clear triggers for default, suspension of further supply, right to repossess, and recovery of costs.
• Set-off restrictions: Prevent the customer from setting off disputed amounts to delay payment.

Your Romalpa clause will usually appear within your Sale of Goods Terms or a broader supply agreement. It should sit alongside other key protections like pricing, delivery terms, warranty limitations and liability caps.

Finally, ensure your customer actually agrees to the clause before supply - the best clause in the world won’t help if it isn’t incorporated into a binding contract.

Step-By-Step: Put Retention Of Title Protections In Place

Here’s a practical, business-friendly roadmap to add Romalpa protections to your sales process.

1) Map your credit exposure

Identify where you supply goods before getting paid. Look at average order values, payment terms, and how quickly goods are installed, on-sold or consumed. This helps you prioritise where Romalpa protection matters most.

2) Update your contracts and onboarding

• Put a robust retention of title clause into your Terms of Trade or supply agreement.
• Refresh your credit application terms so you capture the legal names, ABNs/ACNs and consent needed for PPSR registration.
• Ensure your acceptance process clearly incorporates your terms before you ship (e.g. signed account application, online acceptance box, or executed contract).

3) Plan your PPSR registrations

Decide where you’ll claim PMSI priority (e.g. inventory). Set up internal triggers so registrations are lodged on time and with the correct collateral class. Maintain a register of expiries so you can renew before they lapse.

If you’re not familiar with the process, consider support to register a security interest correctly. Mistakes in debtor details, collateral descriptions or timing can undermine priority.

4) Align your operations

• Warehouse and delivery: Add labels or packing slips reinforcing retention of title. Train staff to hold dispatch for customers who haven’t accepted terms.
• Invoicing and statements: Reference your terms and make due dates and consequences of non-payment clear. If you charge late fees, ensure they comply with Australian law - see our guide to charging late fees on invoices.
• Credit control: Have a process for reminders, holds on further supply, and escalating to recovery if an account goes overdue.

5) Add complementary protections

• Personal guarantees: For company customers, obtain director guarantees to add a second avenue for recovery - here’s a primer on personal guarantees.
• Broader security: Depending on risk, consider a General Security Agreement over assets beyond the specific goods supplied.
• Insurance: Review your trade credit insurance and business insurance settings alongside your contract protections.

6) Be ready to act on default

When an account goes into serious arrears, move promptly. Issue notices required under your contract, suspend further supply, and consider recovery and PPSR enforcement options. If insolvency practitioners are appointed, your perfected security puts you in a better position to assert rights over unpaid goods or proceeds.

Key Takeaways

• A Romalpa clause lets you retain ownership of goods until you’re paid, but under Australia’s PPSA it operates as a security interest that usually needs PPSR registration to rank ahead of other creditors.
• Suppliers of inventory and materials are prime candidates for retention of title protection, especially when offering trade credit or long payment terms.
• Priority often hinges on timing and accuracy - PMSI registrations over inventory generally must be lodged before you supply the goods.
• Strong terms cover title, risk, segregation, proceeds, access to recover goods, mixed/manufactured goods, PPSR cooperation and clear default remedies, all within robust Sale of Goods Terms or Terms of Trade.
• Operational alignment matters: ensure your onboarding, dispatch, invoicing and credit control processes all support your legal protections.
• Layer protections where appropriate - consider director guarantees, broader security and insurance alongside your Romalpa clause and PPSR strategy.

If you’d like a consultation on drafting a Romalpa clause and setting up PPSR registrations for your supply business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.