After much anticipation, the Overseas Investment Amendment Act 2018 has now been passed. The amendments take effect from 22 October, and are far reaching. They impact every residential property transaction.
This article focusses on the changes to residential land. The government’s policy objectives in this respect have been clearly signalled – principally to restrict the purchase of residential land by overseas persons, to address affordability and access issues for New Zealanders.
The Amendment Act does this by including as “sensitive land” all land classified as “residential” or “lifestyle” in the district valuation roll. Such land was previously outside the scope of the regime.
The only people, other than New Zealand citizens, Australian and Singaporean citizens and permanent residents who live in New Zealand, who can now purchase such land are those who are “ordinarily resident” in New Zealand. In this context that means someone who holds a residence class visa, resides in New Zealand, has New Zealand tax residency and has been present in New Zealand for at least 183 days in the past year.
All residential land transactions must now include, at the time of entering into the agreement, a certificate by the purchaser that they are eligible to purchase residential land. Further information will be released in early October about this certificate. These certificates will be a key step for all property lawyers to master.
Exemptions exist for schemes such as apartment complexes and hotel lease-backs, but the overseas purchaser still cannot live in the property. Where consent is required, they do not need to demonstrate a benefit to New Zealand, but must show that they are committed to New Zealand, or that they meet the investor test and will increase housing supply or will use the land for a non-residential use or for a purely incidental residential use. The investor test is having business experience and acumen relevant to the investment and being of good character.
So the purchase of residential land by overseas persons will be more strictly regulated, and consents will be tied to achieving the government’s residential housing policy goals of increased supply and access for New Zealanders. And we will all have yet more paperwork to complete.
Matthew Ockleston is the Managing Partner of Kensington Swan’s Auckland office, where he leads the property team. Brittany Montague is an Associate in that team.