Overseas Investment – Effect on Residential Land
The new laws regarding the Overseas Investment Amendment Act 2018, which were passed in August 2018, will come into effect on 22 October 2018. Though there are far reaching effects of the Amendment Act, this article will focus on the residential land provisions only.
What does the Amendment Act do?
Among other changes, the purpose of the Amendment Act is to assist New Zealand buyers with the purchase of residential property by making homes more affordable. The method of doing this is to bring ‘residential land’ within the definition of ‘sensitive land’, such that overseas investors, presumed to drive up house prices, are more restricted from purchasing residential land. The Act also aims to ensure that any investment in New Zealand land by overseas buyers has benefits to the country.
Under the Overseas Investment Act 2005, buyers who were ‘overseas persons’ (persons who were not New Zealand citizens or residency visa holders in New Zealand) who wished to acquire sensitive land (that land coming within those listed in Part 1, Schedule 1 of the Overseas Investment Act 2005) had to apply for consent to purchase from the Overseas Investments Office.
The definition of what constitutes ‘sensitive land’ has now been extended to residential land under the Amendment Act.
Residential land can include residential and lifestyle land (as classified under the relevant district valuation roll), and can include apartments, bare land among others.
Who is an Overseas Person for Residential Land Acquisitions?
You are an ‘overseas person’ for residential land if you are neither a New Zealand citizen, nor an ‘ordinarily resident’ in New Zealand. An ‘ordinarily resident’ will be one if they hold a permanent visa, have been residing in New Zealand for at least a year, and have been in the country for at least 183 days in the last 12 months and is a tax resident in New Zealand. These criteria ensure that the ‘Commitment to Reside in New Zealand’ test is enforced.
Australian and Singaporean citizens and permanent residents may be treated as if they were New Zealand citizens given the Closer Economic agreements between the countries.
Those who are an associate of an overseas person will also require consent.
A company, partnership, a joint venture or a trust can also be an overseas person.
It is therefore important to be aware of the status of the purchaser and any potentially nominated purchasers.
(Please note that the above definition regards those who are overseas persons for the purposes of purchasing residential land. The definition of ‘overseas person’ differs for other sensitive land acquisitions).
Do Non-Overseas persons need to do Anything?
Any purchaser, whether an overseas person or not, will need to complete a statement prescribed by the Overseas Investment Office, advising whether the Act applies or not. The completed statement must be provided to, and retained by, the purchaser’s conveyancer or solicitor prior to them being able to lodge a land transfer.
Can Overseas Persons still acquire Residential Land?
Overseas persons will be precluded from purchasing sensitive residential land unless they have been assessed and given consent to purchase by the Overseas Investment Office.
Consent is often related to various tests including investment and usage tests, whether residence in New Zealand is intended by the overseas person, and whether the transaction is likely to benefit New Zealand.
Even if consent is provided, conditions may be imposed on the purchase such as that the overseas owner must sell the land as soon as they cease to occupy the land or, where they are developing the land to add to New Zealand’s supply of housing, they sell the land once the developments are complete. Regulators under the Act are able to check compliance by requiring information and declarations once compliance is provided, and when requested.
Obtaining consent to purchase sensitive land from the Overseas Investment Office will likely make offers from overseas purchasers less favourable to vendors, especially where obtaining a timely sale is important. Obtaining consent can be a time consuming and expensive process.
Exemptions for needing to obtain consent are contained within Schedule 3 of the Amendment Act.
A person who may be classed as an overseas person should seek specific legal advice before proceeding to enter an agreement to purchase land in New Zealand.
Please note that this article is a brief summary only and is not legal advice.