Written by Rebecca Clark - Solicitor (Property)

The integral policy of the new Labour coalition Government to review foreign ownership in New Zealand and place restrictions on foreign buyers is a hotly debated topic right now. A Ministerial Directive letter to the Overseas Investment Office (OIO) means that investors in farmland, lifestyle blocks, and non-urban land will soon face additional challenges in obtaining OIO approval. Following on from our recent special bulletin about the upcoming ban on foreign owners of existing residential homes it is useful to take a broad look at how this directive might affect rural land moving forward.

This directive letter came into force on 15 December 2017. Currently, land larger than 5 hectares is subject to approval from the Overseas Investment Office for an overseas person. As a reminder, overseas persons are people who are not New Zealand citizens or ordinarily resident in New Zealand. Generally speaking, organisations are considered legally overseas persons where more than 25% of control or ownership is derived from individuals who are themselves overseas persons.

In deciding whether to approve an overseas investment, the OIO will assess the benefit the land sale will have on New Zealand as a whole. However the directive also suggests that overseas investors are more likely to see their applications approved where their investment will:

• Provide a high level of benefit to New Zealand;
• Create new productive assets;
• Be environmentally sustainable and encourage positive, long lasting environmental benefits; and
• Significantly increase value-added activity in New Zealand.

Rural land
For the sale of rural land to receive consent from the OIO, investors must be able to show substantial and identifiable benefits to New Zealand. Such benefits could include the creation of jobs, new technology or business skills, increased export receipts, and oversight and participation by New Zealanders in the investment.

Forest land
Land which is principally used for forestry activities is likely to be exempt from these new proposed restrictions. Specific conditions of consent may be imposed upon overseas investors looking to invest in “forest land.” The directive gives the example of a requirement to enter into a supply agreement with local processors. Important factors to be considered by the OIO are:

• The increased processing of primary products; and
• Advancement of significant Government strategies or policies.

Sponsorship and community projects
The directive makes it more difficult for the benefit of the overseas investment to be directly proven. Benefit to New Zealand can still be shown consequentially by the sponsorship of community projects or donations. However these are to be deemed less important and beneficial under the previous 2010 directive.

What does this mean for foreign buyers?
Overseas investors wanting to purchase lifestyle blocks over 5 hectares will continue to be restricted by the OIO. When the situation arises, the OIO will “balance the need for highly beneficial overseas investment and the need for New Zealand to maintain ownership and control of sensitive New Zealand assets.”

When working with an overseas investor, we suggest encouraging them to obtain legal advice from the outset for how to best combat these new restrictions and indeed whether they will be able to purchase non-urban land at all. Our property and immigration teams would be happy to answer any queries on this.

Written by Lana McCarroll - Registered Legal Executive (Property)

The last few days leading up to a settlement can be stressful, especially for first-time buyers and sellers. In the midst of all the packing and other things to organise they are sometimes too busy or don’t think about the importance of a pre-settlement inspection.

Clause 3.2 of the agreement for sale and purchase grants the right to the purchaser to enter the property on one occasion prior to the settlement date to examine the property, chattels and fixtures included in the sale. We usually advise purchasers to test any appliances, and to check that there has been no damage to the property caused by the vendors moving out. The purchaser is allowed to re-enter the property on or before the settlement date to confirm the vendor has completed any repair work the parties have agreed upon.

Where a real estate agent is involved, a purchaser commonly relies on them to liaise with the vendors and organise a pre-settlement inspection. If there is a need to raise any issues discovered during a final inspection, clause 8.1(1) states that the purchaser must serve notice of such issues to the vendor on or before the last working day prior to settlement (i.e. before 5pm). At this time of year it is worth noting that for any settlements occurring on 8 January 2018, the purchasers would need to raise any issues prior to 5pm on 22 December 2017, or agree otherwise with the vendor.

We recently encountered a situation where an agent refused to assist the purchasers with their pre-settlement inspection. The vendors were out of town and there were concerns about a dog that was still at the property. Whilst this is understandable from a safety perspective, it is also the agent’s responsibility to manage different circumstances to ensure that the purchasers are able to carry out their pre-settlement inspection. In this case the agent eventually allowed the inspection to take place, and only a few minor issues needed resolving. If there had been major issues discovered following settlement, the agent could have found themselves in hot water for not properly facilitating the final inspection with the purchaser.

Stress levels are already high during these last stages leading into settlement, so by being proactive and encouraging pre-settlement inspections you can save both yourself and your clients a lot of stress on the settlement date.

Written by Louise Maginness – Registered Legal Executive (Property)

Often it is the little things that can be missed when acting for clients.  Unfortunately these little things sometimes have a way of turning into big issues.

The vast majority of the time an agreement will progress relatively smoothly towards settlement as long as everyone is on the same page. We have however seen a few issues in the last few months, and we thought it might be useful to list some examples to help you form an agreement that won’t snowball into a major issue:

1. If you email an agreement to a lawyer and you receive an out of office, please telephone the firm to see who will be dealing with the matter in the lawyer’s absence.  Often there are confirmation dates (usually form and content) due shortly after the date of the agreement and it is important that these dates are adhered to.
2. Try and make the dates for confirmation of the further terms due on the same date wherever possible.  Confirming each condition can mean extra work and extra cost for the client without making the agreement unconditional any sooner.
3. Double check that the settlement isn’t a weekend or a public holiday.  It’s an easy enough mistake to make, but it will mean that settlement under the agreement will be the last working day before the nominated date – i.e. if the settlement date is a Sunday then the transaction will settle the Friday before.  This can confuse clients and upset their plans for moving and arranging finance etc.
4. If the property is tenanted, but is to be sold with vacant possession, please make sure there is enough time to give the tenant the correct amount of notice to vacate under their tenancy agreement.
5. If an agreement is to be signed by an attorney of either the vendor or purchaser, a simple certificate of non-revocation should be completed and attached to the agreement.
6. If the property is a unit title, make sure the pre-contract disclosure is completed and sent to all parties.
7. Dealing with first time home buyers?  Check that the purchaser has allowed enough time in their finance clause to organise their KiwiSaver withdrawal– providers have different timeframes.  You will need to also make sure there is enough time between confirmation and settlement to allow time for the KiwiSaver provider to make the payment. 
8. If the purchaser is applying for the Housing New Zealand HomeStart Grant, there must be 20 working days between confirmation and settlement to allow them to process the application form.  Once Housing New Zealand has approved the application form, they will send us an agreement for the client to sign. This agreement must then be signed and returned to us with our solicitor’s certificate at least five working days before settlement.  The funds can then be paid out to us. 
9. We have also seen a few agreements where one further term is printed straight under the last general term and the rest of the further terms are listed on a separate sheet.  Please put all the further terms in the one place as otherwise they can be easily missed.

Although some of the above points may seem quite obvious, they can save you, as well as your vendors and purchasers, a lot of unnecessary stress, avoid costly mistakes, and ultimately keep your clients happy if the little things are done correctly.

Partner - Property

Phone: +64 3 339 5642

Email: janine.ballinger@cavell.co.nz

Solicitor - Property

Phone: +64 3 409 2705

Email: rebecca.clark@cavell.co.nz

Registered Legal Executive - Property

Phone: +64 3 335 3469

Email: lana.mccarroll@cavell.co.nz

Registered Legal Executive - Property

Phone: +64 3 339 5643

Email: louise.maginness@cavell.co.nz

Feel free to share this newsletter with colleagues or freinds by selecting "Forward to a friend". They may also wish to subscribe and can do so by clicking the "subscribe" link at the top of this newsletter.