New restrictions on overseas persons buying residential land

Written by Jessica Weinberg, a Senior Solicitor with TODD & WALKER Law. 


NEW RESTRICTIONS ON OVERSEAS PERSONS BUYING RESIDENTIAL LAND – WHAT
DOES THIS MEAN FOR QUEENSTOWN LAKES HOMEOWNERS


The Government has introduced the Overseas Investment Amendment Bill. The Bill when it is
passed into law will mean new restrictions on the sale of residential homes and land to
overseas persons.

The definition of “residential land” includes all properties classified as either “residential” or
“lifestyle” for rating valuation purposes which will capture both existing residential dwellings
and lifestyle blocks up to 5 hectares.

New Zealand and Australian citizens and persons ordinarily resident in New Zealand will be
exempt from these new restrictions.

The legislation will not have retrospective effect and will not apply to a transaction entered into
before the Bill is passed into law and achieves Royal assent which is likely to be in February
2018 at the earliest.

The Bill provides that overseas persons would be able to buy sensitive land that is residential
land in certain situations. These are:


 If they will be developing the land and adding to New Zealand’s housing supply; or
 If they will convert the land to another use and are able to demonstrate this will have
wider benefits to the country; or
 If they hold an appropriate visa and can show they have committed to reside in New
Zealand.

The Bill requires that conditions be imposed if an overseas person purchases residential land
utilising one of these exemptions. For example, if an overseas person purchases residential
land to build houses on it, they will be required to sell the land when the houses are built.
The Bill enhances information gathering and enforcement powers of the Overseas Investment
Office, including providing for civil liability for those who contravene the Act. These
enhancements will assist in ensuring compliance with the Act.

Who is an overseas person?

An overseas person under the Bill is anyone who is neither a New Zealand citizen or ordinarily
resident in New Zealand.

A person will be deemed to be ordinarily resident in New Zealand if they hold a permanent
resident visa and have been residing in New Zealand for at least 12 months and have been
present for at least 183 days in the previous 12 months.

Singaporeans may also be exempt from the new legislation as it breaches an existing trade
agreement between New Zealand and Singapore.

Exempt Land

Properties that are not categorised as residential or lifestyle for rating purposes will not be
captured by the new legislation.

For example, properties that are rated as commercial such as a hotel, motel or camp ground
will be exempt from these new rules as they will not meet the definition of residential land.

Criteria for Applying for Consent

Anyone who is an overseas person wishing to buy residential land will need to meet the new
criteria being:

Commitment to New Zealand test

 This test will be met if the overseas person is a New Zealand citizen, ordinarily resident
in New Zealand or the holder of a residence class visa of a type specified in the
regulations who comply with specified conditions.
 Where the overseas person is the holder of a residence class visa the Minister must
also be satisfied that the mandatory conditions relating to occupation and on-selling
set out below will be met.

o The purpose of the investment must be to acquire a residential dwelling, or a dwelling in a long-term accommodation facility, that is constructed or to be constructed on residential land and is for the occupation of the overseas person as their main home or residence in New Zealand.

o The overseas person must dispose of their interest in the residential land if a trigger event occurs. A trigger event is an event set out in the regulations for that class of visa or nationality.

Increase in housing test

 This test will only be available to applications for consent to acquire residential land.
 The test will be measured by comparing the excepted result of the overseas investment
against the state of the residential land prior to the transaction taking effect.
 This test will be met if the relevant Minister is satisfied that, if consent is granted, the
mandatory conditions would be met.
 The mandatory conditions relate to either, or both of, the following outcomes:

o An increase in residential use and on sale – the number of residential dwellings is increased, a long-term accommodation facility is constructed, the number of dwellings in a long-term accommodation facility is increased or development works are carried out which support the proceeding outcomes. Where this outcome is achieved, the overseas person will also be required to dispose of their interest in the residential land within a specified period.

o The construction or extension, and operation of a long-term accommodation facility – this includes increasing the number of dwellings in an existing long-term accommodation facility. Under this outcome, the overseas person will be required to operate the whole of the land under a permitted lease as a long-term accommodation facility within a specified time frame.

 Under both outcomes, the overseas person or any of their associates may not, for so
long as they do retain an interest in the residential land, occupy the land for residential
purposes.

 A residential dwelling is a building or group of buildings that is used or intended to be
used for residential purposes and is occupied or intended to be occupied exclusively
as a home or residence. A residential dwelling does not include a dwelling to the extent
it is part of a long-term accommodation facility.

 A long-term accommodation facility means a retirement village, rest home, a residential
accommodation facility that provides care or assistance to those that live there or a
hostel or other facility used to provide accommodation to students. A long-term
accommodation facility does not include a hospital, hotel, motel, inn, hotel, boarding
house or camp ground.

Benefit to New Zealand test

 This test will be met if the overseas investment will, or is likely to benefit New Zealand
and the specified conditions will be met.
 If the relevant land is also non-urban land that exceeds 5 hectares the benefit must be,
or be likely to be, substantial and identifiable.
 If consent is granted under this test, one or more of the following conditions must be
imposed:

o The conditions which attach to the increase in housing test;
o A condition that the overseas person will dispose of their interest in the residential land within a specified timeframe; or
o A condition that the overseas person or their associates, for so long as they do retain an interest in the residential land, does not occupy the land for residential purposes.

A new, more streamlined screening process for OIO applications will be introduced, provided
certain criteria are met, where the land to be acquired is only sensitive due to being residential
land and is not also sensitive for some other reason under the Overseas Investment Act.

If the regulator has reasonable grounds to believe that a consent holder has contravened the
Act following the granting of consent, failed to comply with any conditions of the consent or
committed an offence under the Act, they may require the consent holder to sell the residential
land.

A full copy of the new Bill is now available to view on line here

This review has been undertaken by Jessica Weinberg, a Senior Solicitor with TODD &
WALKER Law. For more information on what the changes mean contact Jessica at
jessica@toddandwalker.com or Graeme Todd at graeme@toddandwalker.com or 027 433
0457.