Overseas Investment - All fine, or in line for a fine?

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Watch this space: OIO Consent process to be improved
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Assistance for OIO Process
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Have you received a letter from the Public Works Act acquisition
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Kiwisaver changes help home buyers get a foot in the door
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New Information Requirements When Buying or Selling Land
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Kiwisaver Updates – 1 April 2015
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New Lending Restrictions in Force 
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Selling a Unit in a Small Body Corporate
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Kiwisaver and Your First Home Purchase
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Your Legal Property Checklist
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Real Estate Agents and REINZ Memberships
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GST On Land Transactions: Compulsory Zero-Rating
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The Status Of Land Can Impact On Its Value
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Fortune Manning Advises Manson Developments on Sale of Tower
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Amendments To The Residential Tenancies Act 1986
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Property – Try Before You Buy
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The Changing Face of Real Estate Agreements
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Buying Real Estate off Plans? What to look for!
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Courses of Action Available to Tenant Where Landlord Refuses to Grant Renewal of Lease
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Residential Tenancies – What Landlords Need to Know
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Land Information Memorandum – A Useful Tool to the Residential Property Purchaser
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Open Home Theft
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Agent’s Duty to the Vendor Might Include and Obligation to Meet the Purchaser
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Driving Daisy Crazy – Shared Access Ways
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Buying Real Estate at Auction
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Tax Traps in Subdivisions

Overseas Investment – All fine, or in line for a fine?

The intricacies of the new Overseas Investment Amendment Bill 

A recent NZ Herald article reported that a former owner of a property in Auckland was ordered to pay a whopping $847,000 in penalties and costs for failing to get consent from the Overseas Investment Office.  This is a timely shock to remind us to consider the imminent introduction of the new Overseas Investment Amendment Bill (“Bill”).

Under the provisions of the current Overseas Investment Act 2005 (“Act”), “overseas persons” (as defined by the Act) cannot purchase sensitive land without consent.  Sensitive land includes not only beachside houses, big rural properties and land on islands, but much more – some land, unbeknownst to the landowner, is also sensitive land as a result of adjoining other land such as the foreshore or conservation land.  The Bill, which had its first reading in the House just before Christmas in 2017, intends to dramatically widen the scope of the existing Act so that definition of sensitive land will include “residential land”, and also change the definition of “ordinarily resident”.

Under the proposed new provisions, overseas persons will be generally prohibited from purchasing residential land, which includes all land that is categorised as residential or lifestyle for rating valuation purposes, unless that overseas person can obtain Overseas Investment Office (“OIO”) consent.

Three Proposed New Pathways

Under the proposed new provisions, there are certain situations in which the OIO may be prepared to grant consent to an overseas person to obtain sensitive land – three tests have been identified:

1. “Commitment to New Zealand”

The overseas person will meet the commitment to NZ test if that person holds an appropriate visa and can show that they have committed to reside in NZ. Beware that there are “triggering events” which may force on-sale of the land within twelve months.

The triggering events will be recorded in the new Overseas Investment regulations.

2. “Increased housing on residential land test”

Under this test, the OIO can grant consent if it is satisfied that the granting of the consent will result in development of the land and increased housing supply (including the operation of a “long term accommodation facility”) to relieve the pressures of our housing crisis.

3. “Benefit test”

Built on the back of the existing benefit test, the new provisions provide that the overseas person must demonstrate the way in which the land could be developed to provide wider benefits to New Zealand (for instance, by showing the benefits of converting the land to a commercial use).

Conditions may be imposed by the OIO in respect of any consent granted in accordance with the above tests, for example under the increased housing test the overseas person cannot reside on the residential land and the interest in the residential land must be sold within a certain time frame.

OIO: Levelled Up/New Abilities Unlocked

It is also proposed that the OIO will be enhanced with increased information-gathering and enforcement powers in order to enforce new restrictions.  The OIO will be able to order the disposition of land that has been transacted in breach of the restrictions.

What Comes Next?

The Bill is complex and detailed, and will have significant implications for anyone who comes within the updated definition of “overseas person”, which includes individuals, trusts and companies.  If you are interested in further information on how the Bill may impact you, your family or your business, please contact us.

We expect the Bill to be passed into law in the first half of 2018.

A copy of the Bill can be found here: Overseas Investment Amendment Bill.

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