Before investment in significant New Zealand business assets, or the acquisition of certain types of New Zealand land, or fishing quota, overseas persons and entities may need consent under the Overseas Investment Act 2005 (Act). The Act recognises that it is a privilege for overseas investors to own sensitive land in New Zealand or to make significant investments in New Zealand businesses by requiring them to get consent before giving effect to a transaction. It requires the Overseas Investment Office (OIO) to assess whether New Zealand would benefit from the proposed overseas investment. This Practice Briefing is intended to assist practitioners to identify whether their clients may need to obtain overseas investment consent before acquiring New Zealand land or business assets. For information on fishing quota, see the Fisheries Act 1996.
‘Overseas person’ means all individuals who are not New Zealand citizens nor ordinarily resident in New Zealand. Foreign nationals who hold a residence class visa must have lived in New Zealand for at least 12 months and show an intention to reside in New Zealand indefinitely before they cease to be an overseas person under the Act.
‘Overseas person’ may also mean companies, trusts, partnerships and other corporate entities as defined in s(7)(2) of the Act. For example, a company will be an ‘overseas person’ if 25% or more of the company is owned or controlled by individuals or companies who are overseas persons.
Associates of overseas persons are also subject to the Act, including New Zealand citizens and those people who ordinarily reside here (refer to the definition of an associate in section 8 of the Act). For instance, an overseas person cannot avoid the requirements of the Act by directing New Zealand business partners to acquire sensitive land or significant business assets on their behalf. Care is also needed where a person buys property with the intention to nominate an overseas person.
The OIO will ’look behind’ trusts and other business arrangements to understand who has ultimate beneficial ownership or control of an investment.
An overseas person with a New Zealand spouse can purchase sensitive land without consent, provided that the land will be “relationship property” as defined by the Property (Relationships) Act 1976.
Overseas persons will require consent under the Act before they can acquire interests in sensitive land. The interest could be a legal or equitable interest and includes a leasehold interest over three years.
Sensitive land is defined in Schedule 1, Part 1 of the Act.
For example, sensitive land includes:
The above list is not exhaustive. You should refer to Schedule 1 of the Act for a full list of the land that is subject to the Act.
The Overseas Investment Amendment Bill has introduced changes to the OIO to restrict foreign buyers of residential property. The definition of sensitive land under the Act has been extended to include residential and lifestyle land. As of 18 August 2018, these changes have now been passed by Parliament and the new law commences on October 22, 2018. People who hold New Zealand residence-class visas, but don’t live here will be able to apply to the OIO for consent to buy a home. Those who hold temporary visas, such as visitor, student, working holiday, or work visas, generally won’t be able to buy.
Applicants and their advisors should conduct a careful examination of the survey plan of the land to be acquired, and all adjoining parcels, to assess whether that land is sensitive land under the Act. The OIO recommends that overseas investors engage an accredited land expert to undertake the assessment. You can find out more on the OIO website about getting an accredited supplier to provide a sensitive land certificate.
Overseas persons and companies may require consent before investing in significant business assets in New Zealand. An overseas investment in significant business assets includes three key types of transaction:
Even if an overseas person’s investment in business assets is less than NZD $100 million, consent will be required if the investment includes ownership or control of sensitive land.
Any agreement for sale and purchase of sensitive land, or to acquire an interest in business assets, should be made conditional upon the overseas person successfully obtaining overseas investment consent. The agreement must also allow enough time for consent to be obtained.
You can find out more about how to apply for consent and what is required to be included in a consent application from the OIO website.
Failure to get consent can lead to an investor having to sell their interest or having a transaction cancelled. There may also be criminal consequences (up to a year in prison or a fine of $300,000) or civil penalties, which could lead to any profit being stripped.
The process for overseas investors wanting to invest in New Zealand can be a complex and time -consuming process and the consequences for the investor who fails to gain consent can be serious. The further restrictions recently introduced may create a surge in inquiries on the types of issues addressed in this briefing.