What you must know about investing in New Zealand from overseas

You are not a New Zealand resident and you are considering investing in New Zealand property. Does your investment need to be approved by the New Zealand Government’s Overseas Investment Office? Here are some facts you should know in order to avoid potential legal issues associated with your investment in New Zealand.

Overview

Your property purchase may require Overseas Investment Office (OIO) approval if:
  • You are an overseas person or an associate of an overseas person, and
  • You are looking to acquire sensitive New Zealand assets such as farm land and large non-urban properties.
What do I need to do to get OIO approval?
  • Satisfy the criteria detailed in the Overseas Investment Act 2005 (OIA) for an overseas investment in New Zealand, and
  • Submit an application, fee, and all necessary supporting evidence to the OIO.

If you are a New Zealand citizen living abroad, you typically will not need to obtain consent from the OIO except for certain special cases.

What type of transactions will require consent from the OIO?

A transaction will require consent under the OIA if it will result in any of the following:
  • An overseas investment in sensitive land.
  • An overseas investment in significant business assets, i.e. NZ$100 million or more.
  • An overseas investment in fishing quota.

An overseas investment in sensitive land is the acquisition by an overseas person, or an associate of an overseas person, of either an interest in sensitive land, or rights or interests in the securities of a person if that person owns or controls, directly or indirectly, an interest in sensitive land.

If you are looking to acquire a typical investment property in an urban area in New Zealand, your investment is unlikely to require consent from the OIO.

Do I need to a consent from the OIO for my investment in New Zealand?

For property investments, your investment will not require a consent unless your investment involves sensitive land. For investments involving sensitive land, if you are a New Zealand citizen living abroad, you will not need to apply for a consent provided you are investing for yourself. You may need to obtain consent from the OIO for your investment if the investment is to be made jointly or on behalf of an overseas person. However there are certain circumstances by which your investment may be exempted from requiring a consent. A legal expert should be consulted to determine whether your investment will require consents from government entities other than the OIO.

Who does the OIO consider to be an overseas person?

In the context of investing in New Zealand, you will be considered an overseas person if you are not a citizen of New Zealand, or are not ordinarily resident in New Zealand. This definition also legally applies to companies, partnerships, joint ventures, or trusts in which an overseas person(s) has entitlement to, or control over 25% or more of the entity’s profit, assets, or governance. If you are a New Zealander buying sensitive land you may still be required to get approval from the OIO if an overseas person is associated with the transaction.

Who does the OIO consider to be an associate of an overseas person?

In the context of an overseas investment, you are legally an associate of person A if you are A’s agent, trustee, representative, or act in any way on behalf of A. This definition also applies if you are acting jointly with A in relation to the overseas investment. Finally, the above definition will apply regardless of whether the association is directly with A, or indirectly through another associate of A.

Can my investment be exempted from the consent requirement?

If either you or your spouse are an overseas person, your property investment in New Zealand can be exempted from needing a consent provided at least one of you are a New Zealand citizen, or are ordinarily resident in New Zealand, and the property to be acquired is, or will be, relationship property as defined in section 8 of the Property (Relationships) Act 1976.

What type of land is deemed to be sensitive?

Land is deemed sensitive if it is one of the types of land detailed in Part 1 of Schedule 1 of the OIA. Typically, sensitive land refers to non-urban land with area greater than five hectares, land held for conservation purposes, and land subject to a heritage order. Land is deemed sensitive if a portion of the land adjoins sensitive land.

If I need a consent for an overseas investment in sensitive land, what are the criteria?

In order to obtain a consent, the relevant Minsters must be sure that all of the following criteria are satisfied (section 16 of the OIA 2005):
  1. You and your associates, if any, must have business experience and acumen relevant to that overseas investment,
  2. You and your associates must demonstrate financial commitment to the overseas investment,
  3. You and your associates are of good character,
  4. You and your associates must be eligible to enter New Zealand,
  5. Either you and your associates are New Zealand citizens, or ordinarily resident in New Zealand, or intend to reside in New Zealand indefinitely, or the overseas investment itself will, or is likely to, benefit New Zealand (section 17 of the OIA 2005),
  6. If the investment involves farm land, the farm land or the securities to which the overseas investments relates to must have been offered for acquisition on the open market to persons who are not overseas persons in accordance with the procedures set out in the Overseas Investments Regulation 2005 (Regulation).

I need a consent, how do I apply for one and how long should I expect to wait?

The OIO requires all applications to be made by way of letter with supporting information. There is no standard application form due to the significant variations in the evidence and supporting information required for each application. During the application process, all relevant documents should be supplied in both hard and soft copies. Please note that all submissions made to the OIO are public record, and that the OIO periodically releases a short summary of every consent granted or declined. In certain cases however, the Office may withhold the existence of an application in accordance with the provisions of the Official Information Act 1982.

There is no set timeframe within which an application for consent must be decided, however decisions involving the acquisition of sensitive land or applications for exemptions will typically be decided within 50 working days of active consideration.

What are the requirements for application for consent?

An application for consent must satisfy the following criteria:
  1. Be in writing, and
  2. Be signed by each applicant, and
  3. Contain the information specified by the Minister by notice in the Gazette, and
  4. Be accompanied by a statutory declaration verifying that the information contained in the application is true and correct, unless the regulator waives this requirement, and
  5. Be sent to the regulator, and
  6. Be accompanied by the relevant fee, unless this has already been paid.

The statutory declaration must be made by each applicant involved in the investment. If you are successful in your application, you must have a postal or street address in New Zealand for service of documents, and notify the regulator of that address as well as updating the regulator of any change in that address.

What are the procedures if I am an overseas person wishing to purchase farm land?

The farm land to be acquired must have been offered for acquisition on the open market before consent can be granted. The Regulation established the procedure and minimum standards for advertising. You should include evidence such as copies of advertisements and brochures with your application to the Overseas Investments Office. If the advertisement does not meet the requirements, the property may need to be re-advertised in order for your application to be processed.

The procedure for offering farm land for acquisition on the open market is as follow:
  1. The owner must advertise that the farm land is available for sale.
  2. The advertisements used must contain a general description of the relevant land, and contain a statement that says that the farm land is available for sale, that offers are being sought from potential buyers, and state the contact details of the owner.
  3. The advertisement must be published in a medium listed in Schedule 1 of the Regulation, and is generally available to persons in the district in which the relevant land is located. The form of the advertisement must also be in accordance with the minimum requirements set out in Schedule 1 for that particular advertising medium.
  4. The farm land must be available for acquisition on the open market for at least twenty working days after an advertisement is first placed, or for a longer period if the advertisement has stated or implied that offers will be accepted for that longer period. However, the owner may accept an offer before the end of the period from a buyer who is not an overseas person.
  5. The advertisement must be published within the previous twelve months that precedes the earlier of the date on which an application for consent is made, or the date on which the relevant overseas investment that requires consent is given effect to.

Who is in charge of consent approval?

For business acquisitions requiring a consent, the relevant Minister is the Minister of the Crown, who is responsible for the administration of the OIA. For overseas acquisition of sensitive land, the relevant Minister is the Minister of the Crown and the Minister for Land Information. Consent approval may also be processed by regulators appointed by the relevant Ministers.

How does the OIO assess the benefit of overseas investment in sensitive land?

The following criteria will be considered when assessing the benefits of the overseas investment:

  1. Whether the overseas investment will, or is likely to, result in:
    • The creation of new job opportunities in New Zealand or the retention of existing jobs in New Zealand that would or might otherwise be lost, or
    • The introduction in New Zealand of new technology or business skills, or
    • Increased export receipts for New Zealand exporters, or
    • Added market competition, greater efficiency or productivity, or enhanced domestic services, in New Zealand, or
    • The introduction into New Zealand of additional investment for development purposes, or
    • Increased processing in New Zealand of New Zealand’s primary products.
  2. Whether there are or will be adequate mechanisms in place for protecting or enhancing existing areas of indigenous vegetation, significant habitats of protected wildlife, or historic heritage within the land.
  3. Whether there are or will be adequate mechanisms in place for providing, protecting, or improving public access.
  4. If the relevant land is or includes foreshore, seabed, or a bed of a river or lake.
  5. Any other factors set out in the Regulation.

Are there any special circumstances which will delay the decision for the consent to be granted?

If the land you are looking to acquire includes special land, i.e. foreshore, seabed, riverbed, or lakebed, the special land must be offered back to the Crown for acquisition before a consent can be granted for the application.

 

Published on Tuesday, March 18th, 2014, under Articles, Buying Property, Finance, Law, Insurance

Comments are closed.

Disclaimer  |  Privacy Policy  |  REAA Rules  |  Copyright © 2017 Erskine & Owen, All rights reserved. Licensed (REAA 2008)