Bans on Foreign Ownership of Residential Property now in force

On 22 October 2018, Labour delivered on its promise to ban foreign ownership of New Zealand residential land. 

The restrictions in the Overseas Investment Act now apply to all residential land in New Zealand. 

The definition of residential land in the Act includes both residential and lifestyle land (determined by the local Council rating status) and includes bare land, apartments, and some mixed-use properties.

Some residential land will also be classed as sensitive for other reasons (i.e., it is by a lake, riverbed or reserve).  Different rules apply for these types of land and we advise all our clients to take specific legal advice if the land you wish to purchase is considered sensitive.

Residential Land Statements

If you are purchasing a property you will  be required to sign a Residential Land Statement,  (whether you are a New Zealand resident or not).  This Statement confirms whether or not the Act applies.  Solicitors and conveyancers cannot register transfer documents without this statement.

It is vital that the Residential Land Statement is correct as there are fines imposed of up to $300,000.00 for making a false or misleading statement.

New Zealand Residents

A New Zealand resident is someone who is:

• A New Zealand citizen;
• A New Zealand residency visa holder who has physically lived in New Zealand for the immediately preceding 12 months for a minimum of 183 days;
• Australian citizens and permanent residents; or
• Singaporean citizens and permanent residents;

If you fall into one of the above categories, your Residential Land Statement will detail which category you fall into, along with other information about the property you are purchasing. 

Overseas Residents

If you do not fall into one of the above categories, you will be considered an overseas person.  This means that if you wish to buy residential or lifestyle land (of any size), or lease it for 3 years or more, will need to apply to the Overseas Investment Office (“OIO”) for consent.  However, consent will not be required for any contracts that are entered into prior to 22 October 2018.

An overseas person includes:

• Individuals;
• family trusts where at least one of the settlors, trustees or fixed beneficiaries is an overseas person; and
• companies where the controlling owner is an overseas person (i.e., holds more than 25% of the shares).
  If you want to invest in an entity that already holds residential land in New Zealand, you may also require consent, particularly if you are looking to purchase a 25% or more ownership interest in that entity.

If you fall into this category, your Residential Land Statement will need to record your OIO consent number, along with other information about the property you are purchasing. 

Purchasing through a Company or Trust

A trust or company will be considered an overseas person if it is controlled by an overseas person.

In order to get consent, all people whole control the trust or company must be considered New Zealand residents.  All controlling owners will be required to use the property at their main home.   

How to Apply for Consent

If you fall into the Overseas Person category and are considering buying residential land in New Zealand you should apply for consent as soon as possible.  You do not have to have found a property you want to buy before applying for consent.  The OIO consent process is a bit like obtaining pre-approval for finance from a bank.

There are specific forms to complete and these are obtainable from the Land Information New Zealand website.    The completed forms are then submitted online and it can take up to 10 working days for consent to be granted.  There is a fee payable of $2,040 for individuals and $3900 for companies or trusts.  There are different fees which apply for sensitive land and details of these fees can be found here.

To obtain consent, you will need to comply with various conditions.  These are:

• The property must be used as your main home;
• You must be present in New Zealand for 183 days in each 12 month period after consent is granted; and
• You must continue to hold a residence class visa, or continue to be an Australian or Singaporean citizen or permanent resident.

The OIO may impose additional conditions and if you fail to meet any conditions at any time after consent is granted, you may be required to sell the land or face penalties and/or fines. 

Exemptions

There are a few exemptions to the requirement for overseas people to obtain consent where you are in a couple and purchasing a relationship property, or where property is inherited.  There are additional rules around these exemptions and we advise all clients to get legal advice before relying on one of these.