Recent Overseas Investment Act changes prevent overseas persons from buying residential land.
Changes to the Overseas Investment Act regime came into force on 22 October 2018. The main extensions to the regime:
Who do the changes apply to?
With some exceptions for Australian and Singaporean citizens, an overseas person is anyone who is not a New Zealand citizen or is not ‘ordinarily resident’ in New Zealand.
To be ‘ordinarily resident’ a person must meet a four part test:
Residence class visa holders as well as Australian and Singaporean permanent residents that are not ordinarily resident in New Zealand can apply to the Overseas Investment Office for consent to buy one home to live in.
Which residential property transactions are captured?
As set out on the LINZ website, the new regime applies to land that is categorised as ‘residential’ or ‘lifestyle’ under the District Valuation Roll and while this includes most houses, flats and apartments, there are also fairly large lifestyle blocks that are considered residential.
One way to check whether a property is classed as residential is to use a property website such as www.qv.co.nz and look for the ‘Building Type’. Properties with a Building Type ‘residential’ or ‘lifestyle’ are captured by the new regime. Some councils also provide this information.
The changes also capture certain leases: fixed term leases which exceed 3 years (including rights of renewal) and residential tenancies of more than 5 years, provided that the only reason the land is sensitive is because it is residential land (and not otherwise sensitive for any other reason).
Another important aspect of the regime is the requirement for all purchasers of property (including New Zealanders) to complete a Residential Land Statement. The Residential Land Statement must be completed by the purchaser and provided to the conveyancer or lawyer acting in the transaction, who must retain a copy for at least 7 years. There are penalties for both conveyancers who do not comply and purchasers who make false statements.
Are any residential transactions exempt?
There are a limited number of exemptions that overseas persons can apply for to buy residential land, but not live on it:
Residential property developers may be able to apply for an exemption certificate which would enable them to sell up to 60% of the development to overseas persons off-the plans. The purchasers may keep the units as an investment but cannot live in them. Without an exemption certificate, sales to overseas persons are not permitted. On-sales by overseas persons to any overseas persons will not be permitted under the regime. To qualify for an exemption certificate:
What are the changes to forestry investments?
Overseas persons wanting to invest in freehold or leasehold land which is forest or to be converted to forest require consent from the Overseas Investment Office. LINZ states on their website that the changes extended the requirement for consent to investments in more than 1,000 hectares of forestry rights in any year. Forestry rights are different to other investments as they do not involve the sale of the land, but the right to grow and harvest the crop. You can purchase up to 1,000 hectares of forestry rights per calendar year, or any forestry right of less than three years duration, without approval.
If you have any questions about the changes to the Overseas Investment Act regime and how they might affect you please get in contact with us.