Changes to the Overseas Investment Act (“OIA”) have now been passed by Parliament and come into effect on 22 October 2018. This means that any agreement for the sale of residential land entered into on or after 22 October will be affected by these changes. As agents, you need to be aware of what these changes mean and how best to deal with buyers who may be required to obtain consent from the Overseas Investment Office (“OIO”).
Residential Land Statements
All purchasers who sign an agreement on or after 22 October 2018 will be required to complete “residential land statements” in which they will be required to declare whether they require OIO approval. These statements need to be provided to their lawyers in order to complete the transfer of residential land (regardless of whether or not they need OIO consent).
Any overseas person who wants to purchase residential land will be well advised to obtain legal advice before signing an agreement for sale and purchase. There are penalties for entering into unconditional agreements (where OIO consent is required) before consent is granted.
Agents should check whether prospective purchasers require OIO approval before finalising agreements for sale and purchase. This may mean asking for proof of citizenship and checking visa statuses. Also, adding a clause making the agreement subject to obtaining OIO approval may be necessary. Care should also be taken to ensure that the correct answer is given to the “Land Act/OIO” question on the front page of the ADLS agreement form.
People who do not hold residence class visas (e.g. people on a temporary, work or student visa) are unlikely to be able to get OIO consent to purchase residential land.
What is “residential land”
“Residential land” is defined as land that has the property category of “residential” or “lifestyle” under the district valuation roll. All residential land is now considered to be “sensitive land” for the purposes of the OIA. Land can also be considered sensitive for other reasons if it meets other criteria (e.g. is more than 0.4 ha and adjoins rivers, lakes or conservation areas, is an off shore island or is more than 0.2 ha and adjoins the foreshore).
Who is eligible to purchase residential land without OIO consent?
NZ, Australian or Singaporean citizens and permanent residents who are “ordinarily resident” will not need OIO consent to purchase residential land. A couple will not need OIO consent if one spouse, civil union or de facto partner is a NZ citizen.
For the purposes of purchasing residential land under the OIA, “ordinarily resident” means that a person:
- Holds a residence class visa; and
- Has lived in NZ for the immediately preceding 12 months; and
- Has been present in NZ for 183 days in that preceding 12 months; and
- Is a tax resident.
Obtaining OIO consent
People who are not NZ, Australian or Singaporean citizens or ordinarily resident in NZ will not be able to purchase residential land without OIO consent. There are several ways in which OIO consent to purchase residential land can be obtained including under the “commitment to reside” test. Under this test, someone with a residence class visa who intends to reside in NZ and become a tax resident can apply for OIO consent. Applications can be made in relation to a particular property, or as a “pre-approval”.
How long is it likely to take to get consent?
The OIO website is stating that simple applications for consent under the “commitment to reside” test may take around 10 working days to approve and the application fee is $2,040. However, until application and consents start flowing through the OIO system, it is difficult to be certain about timeframes. More complex applications, or where the purchaser is an entity (e.g., trust or company) are likely to take more than 10 working days to complete. It would be best to err on the side of caution and make the conditional period for working through OIO consent matters to be a minimum of 15 working days.
This is a short summary of the complex changes that have been made to the OIA and is intended to be a guide only. Please contact one of our Property team experts if you have any questions or would like further information.