The Overseas Investment Amendment Bill is now an Act, having received Royal Assent on the 22nd of August, and is expected to come into force sometime in mid-October (but in any event no later than 22 October 2018).

Importantly:

• the Amendment Act will not apply to agreements for sale and purchase entered into before the Act comes into force. As such, overseas persons likely still have a few final weeks in which they can enter into an agreement to secure a residential property in New Zealand without having to worry about compliance with the new law.
• the Amendment Act doesn’t interfere with the rights of overseas persons in relation to residential property they already own.

We set out below a brief overview of the key aspects of the new law (as it applies to residential property only).

The key change – residential is now sensitive

The basic prohibition under the Overseas Investment Act 2005 (“OIA”) remains the same as it has always been – “overseas persons” cannot purchase “sensitive land” without first obtaining Overseas Investment Office (“OIO”) approval. The fundamental change made by the Amendment Act is to alter the definition of “sensitive land” so that it now includes all “residential land”. Thus, subject to a few limited exceptions discussed below, “overseas persons” will not be able to purchase “residential land” without first obtaining OIO approval.

“Residential land” for this purpose includes any property classified as residential or lifestyle in the relevant rating valuation roll. It will therefore capture almost all properties which you would generally think of as being residential – and some which you might not (such as retirement villages).

New definition of an “overseas person” for natural persons

The Amendment Act also introduced a very slightly amended definition of the term “overseas person”. In particular, a natural person (i.e.individual people as opposed to companies or trusts) is an “overseas person” if they are neither a New Zealand citizen nor ordinarily resident here. A natural person is now “ordinarily resident” in New Zealand for the purpose of a residential property purchase if they:

• hold a New Zealand residence class visa; and
• have been residing in New Zealand for at least 12 months; and
• are tax resident here; and
• have been present in New Zealand for at least 183 days or more in total in the immediately preceding 12 months (counting presence in New Zealand for part of a day as a presence for a whole day).

Importantly, this means that simply holding a New Zealand residence class visa will not alone be sufficient to enable individuals to purchase a residential property without first obtaining OIO approval.

The Amendment Act has not changed the definition of “overseas persons” in relation to companies and trusts. In short, the position remains that if a company or trust (or any other type of entity for that matter) is 25% or more owned or controlled by an “overseas person”, the company or trust will itself be an “overseas person” (and will therefore be caught by the new restriction).

Exemptions

As a result of the Government’s obligations under the Comprehensive and Progressive Trans-Pacific Partnership (CPTTP) Agreement, exemptions have also been made for Australians and Singaporeans in Part 4 of the Overseas Investment Amendment Regulations 2018 (provided the residential land they are looking to acquire is not sensitive for any other reason).

There are a handful of more generally available exemptions from the requirement to obtain OIO consent for a purchase of residential (but not otherwise sensitive) land. In particular, exemptions are available for:

• periodic leases of residential land or residential tenancies with a term (including renewal rights) of less than five years.
• apartments within multi-storey development of 20 or more apartments which are purchased ‘off the plan’ (provided the developer has themselves applied for and obtained an exemption).
• a hotel of more than 20 units or land to build a hotel of more than 20 units, provided the overseas person enters into a lease-back arrangement with the hotel operator/developer.

There is also an already existing (but often very helpful) exemption which often allows a married or long term couple, one of whom is an overseas person, to acquire residential property (or other sensitive land) in New Zealand.

Not a complete ban – applying for consent

The Amendment Act does not impose a complete ban on overseas persons acquiring residential property in New Zealand. Overseas persons remain free to apply to the OIO for consent to purchase.

In order to obtain consent to acquire residential land, an overseas person must demonstrate to the OIO:

1. they are already permanent resident or resident visa class holders and they have a commitment to reside, and become tax resident, in New Zealand; or
2. that they will increase the housing supply via their investment (and they will on-sell once the development is completed); or
3. they will be acquiring residential land for conversion to a nonresidential use or a residential use incidental to a relevant business use; or
4. the acquisition will be beneficial to New Zealand.

Our experience with the existing regime (where OIO application fees start at $22,500 and applications take months to process) suggest to us that in practice applying for consent will not be an option for most “mum and dad” would-be overseas residential property purchasers. This is presumably the exact outcome which the Government was hoping to achieve.

Get professional advice

Before embarking on an OIO application or signing any sale and purchase agreement sound legal advice is essential as mistakes can be costly.

Talk to us

For more information on this topic contact our Overseas Investment Team today.

The controversial Overseas Investment Amendment Bill that encapsulated the Government’s election commitment on banning foreign buyers purchasing homes in New Zealand has been the subject of a review by the Parliamentary Finance and Expenditure Select Committee.

The Committee is due to report this week (by 21 June 2018). The Bill was introduced into Parliament on 14 December last year. A total of 302 submissions have been received by the Committee, many calling for changes to the Bill.

The Property Institute of New Zealand in their submission argues that the Bill in its current form could lead to a contraction in housing availability as investors shy away from increased risk, which would in turn exacerbate the shortage of quality rental housing.

A submission by The NZ Institute of Economic Research and others highlight the risk of contagion to other types of investment. “It’s widely felt that the amendment sends an unfriendly signal to foreign investors who have previously seen New Zealand as welcoming of overseas investors, and when we are a country that is far away and small”.

It will be interesting to see what recommendations the Committee makes to the Government. 

Talk to us

We understand the needs of foreign investors. We can help with all aspects of your New Zealand investment, including purchasing property, obtaining Overseas Investment Office consent, forming a company and assisting you to purchase shares in a company or its business and assets.

Contact our Overseas Investment Team today to discuss how we can assist you.

The Overseas Investment Amendment Bill introduced into Parliament under urgency by the Coalition Government in December last year is yet to become law.

In spite of this, a recent decision made by the Conservation Minister and the Associate Finance Minister suggests that even though the law hasn’t changed, the goalposts may have nevertheless shifted for new overseas investment in regional New Zealand.

Bathurst Coal Limited applied to the Overseas Investment Office (‘OIO’) to acquire the Sullivan Mine on the Denniston Plateau.

The OIO, having presumably undertaken its usual rigorous review of the application, recommended to the relevant Ministers that the benefits to New Zealand of the investment were sufficient to pass the relevant statutory test and therefore that the application should be approved.

Notwithstanding that advice received from the OIO, the relevant Ministers were not satisfied that the benefits to New Zealand of the investment were likely to be substantial and they turned down the application.

Does this signal a slightly shift in approach – almost certainly yes (and, to be fair, this is consistent with media coverage of the Government’s position). How big is that shift and where should we now draw the line – who knows? 

Where individuals stand on the foreign ownership debate will vary. One thing that I would hope we can all agree on is that businesses need a certain regulatory environment and goalposts in which to operate. 

Talk to us

We understand the needs of foreign investors. We can help with all aspects of your New Zealand investment, including purchasing property, obtaining Overseas Investment Office consent, forming a company and assisting you to purchase shares in a company or its business and assets.

Contact our Overseas Investment Team today to discuss how we can assist you.

Yesterday, the NZ Government introduced into Parliament legislation proposing an amendment to the Overseas Investment Act 2015.

The legislation will mean that foreign buyers will not be able to buy residential property unless they are either increasing the number of residences and then selling, or converting the land to another use and are able to show that this will have wider benefits to the country.

New Zealand and Australian citizens will be exempt from the regime, irrespective of where they live.

In addition, holders of New Zealand permanent resident visas will be exempt if they have been living here for at least 12 months, and have been present in the country for at least 183 days in the past 12 months.

The Bill will be sent to a Select Committee who will consider it early next year, which gives New Zealanders an opportunity to comment on the details of the Bill.

The government is aiming to pass this legislation in the new year and for the new rules to take effect in early 2018.

What is difference between a resident visa and a permanent resident visa?

Both resident and permanent resident visa give the visa holder a right to live and work in New Zealand indefinitely. The fundamental difference is that a resident visa holder who leaves New Zealand may only travel to and be granted entry permission as a resident if the conditions of the visa allow, known as travel conditions. Most resident visas are initially granted with two years of travel conditions, which may be extended.

A permanent resident visa, on the other hand, entitles the holder to travel to and be granted entry permission as a resident indefinitely.

When and how can I apply for a permanent resident visa?

You can apply for a permanent resident visa after you have held a resident visa for 2 years without interruption. You must have also met any conditions imposed on your Resident Visa which can include a sponsorship period of up to 5 years.  

The government is aiming to pass this legislation in the new year and for the new rules to take effect in early 2018.

What is the difference between a resident visa and a permanent resident visa?

Both resident and permanent resident visa give the visa holder a right to live and work in New Zealand indefinitely. The fundamental difference is that a resident visa holder who leaves New Zealand may only travel to and be granted entry permission as a resident if the conditions of the visa allow, known as travel conditions. Most resident visas are initially granted with two years of travel conditions, which may be extended.

A permanent resident visa, on the other hand, entitles the holder to travel to and be granted entry permission as a resident indefinitely.

When and how can I apply for a permanent resident visa?

You can apply for a permanent resident visa after you have held a resident visa for 2 years without interruption.

You must have also met any conditions imposed on your Resident Visa which can include a sponsorship period of up to 5 years. 

Talk to us

We understand the needs of foreign investors. We can help with all aspects of your New Zealand investment, including purchasing property, obtaining Overseas Investment Office consent, forming a company and assisting you to purchase shares in a company or its business and assets.

We can also assist with residence and permanent residence visas, including investment and business visas for those seeking to migrate to New Zealand.

We don’t just advise on the visa requirements, we can ensure that you receive comprehensive legal advice as to all aspects, including asset protection, trusts, corporate governance, compliance and employment.

If you have any questions about foreign investment in New Zealand or investment and business visas, please contact us for professional legal advice that will give you peace of mind.

Foreign investment into New Zealand has been a hot topic, particularly during 2017, with a significant amount of focus on the New Zealand property market and increasing cost of housing.

On 25 October 2017, the new Prime Minister announced that by Christmas this year a Bill to stop foreign buyers from purchasing existing residential homes would go before Parliament. 

What is the position right now?

The Overseas Investment Act 2005 already prevents “Overseas Persons” from purchasing “Sensitive Land” unless they first obtain consent from the Overseas Investment Office (a process I’m not going to describe here, other than to say that it is long and expensive).

“Sensitive Land” for this purpose currently includes a variety of classes of land, most notably:

• Non-urban land over 5 hectares (i.e. farm land);and
• Land that adjoins foreshore or seabed.

The term “Overseas Person” includes any person who isn’t either a NZ citizen or “Ordinarily Resident” in New Zealand. To be “Ordinarily Resident” in New Zealand a person needs to both hold a residence class visa and reside in NZ and have done so for at least 12 months. It also includes any company or other entity that is more than 25% owned or controlled by an “Overseas Person”.

So, some (very much simplified) examples, currently:

• If you are a NZ Citizen you can buy any property in NZ whether or not you currently live here.
• If you aren’t a NZ Citizen and don’t hold a residence class visa for NZ you can’t buy a farm, but you can buy most residential houses
• If you hold a residence class visa for NZ, but don’t yet live here (or have only just arrived) you can’t buy a farm, but you can buy most residential houses
• If you hold a residence class visa for NZ and have lived here for over a year you can buy any property in NZ    
• A company which is owned more than 25% by an Overseas Person can’t buy a farm, but can buy most residential house.

What is going to change?

Detail is scarce at this stage, but from what we have been able to glean from the available public announcements it appears that the Government intend to:

Expand the definition of “Sensitive Land” so that it includes existing residential houses.

 Alter what constitutes an “Overseas Person” in some, as of yet unspecified way; and

 Exempt Australians from these new requirements.

Will you be affected?

Applying this to our above examples, it will mean that:

If you aren’t a NZ or Australian citizen and don’t hold a residence class visa for NZ you won’t be able to buy a farm or an existing residential house.

If you are a citizen of anywhere other than NZ and Australia but you hold a residence class visa for NZ, but you don’t yet live here (or have only just arrived) you won’t be able to buy a farm or an existing residential house.

What next

We, like everybody else, await further clarification of the Government’s position with baited breath. The Government is no doubt going to have to walk a fine line between targeting the ‘overseas speculators’ that it is has publicly made clear it is looking to exclude while still encouraging foreign capital and highly skilled workers into our businesses and economy. The devil, as always, will be in the detail.

Talk to us

We understand the needs of foreign investors. We can help with all aspects of your New Zealand investment, including purchasing property, obtaining Overseas Investment Office consent, forming a company and assisting you to purchase shares in a company or its business and assets.

We can also assist with investment and business visas for those seeking to migrate to New Zealand and invest or operate their own business here. We don’t just advise on the visa requirements, we can ensure that you receive comprehensive legal advice as to all aspects, including asset protection, trusts, corporate governance, compliance and employment.

If you have any questions about foreign investment in New Zealand or investment and business visas, please contact us for professional legal advice that will give you peace of mind.