New Zealand generally welcomes foreign investment. The regulation of foreign investment in New Zealand is liberal by international standards. However, the regime was tightened in October 2018, especially in relation to foreign investment in residential land.
Is the land "sensitive land"?
Are the assets "significant business assets"?
1. Sensitive land
The OIO will consider the following criteria when reviewing applications for consent to invest in sensitive land that is not residential land:
- whether the investment is likely to benefit New Zealand (unless the overseas person is intending to reside in NZ);
- where the investment includes non-urban land that either alone or together with any associated land exceeds 5ha, whether the benefit to NZ is substantial and identifiable; and
- all of the criteria set out below that apply for investment in significant business assets – this is known as the investor test.
For applications for residential land that is not otherwise sensitive, the criteria that apply depend on the status of the overseas person and the land being purchased. These tests may include one or more or the following:
- benefit to New Zealand test;
- commitment to reside in New Zealand test;
- increased housing test;
- non-residential use test;
- incidental residential use test; and
- investor test (see the criteria set out below that apply for investment in significant business assets).
Counterfactual test: To determine whether the "benefit to New Zealand” criteria is satisfied, the OIO uses a counterfactual test. This involves comparing what is likely to happen with the overseas investment, with what is likely to happen without the overseas investment. This is a complicated process. It requires assessment against the plans of others who may have been intending to purchase the land, hypothetical well-funded NZ purchasers, and the vendor’s intentions if the sale does not proceed.
Investment plan: An investment plan is required for investments in sensitive land. The investment plan must include a business plan, and other requirements prescribed by the OIO.
Special land: “Special land” is land that is or includes foreshore, seabed, river bed or lake bed. The owner of special land must offer it to the Crown in accordance with the Regulations before it is offered to an overseas person.
Farm land: Any farm land must have first been offered on the open market in NZ, in accordance with the procedures set out in the Regulations. Limited exemptions apply to this requirement. Under the Act, “farm land” is land exclusively or principally used for the purpose of agriculture, horticulture or pasture, or the keeping of bees, poultry or livestock.
Forestry rights: Forestry rights are now captured under the Act as sensitive land. This means overseas investment in land to be used for forestry that is 1,000ha or more will require consent.
Exemptions for residential land
Summarised below are the main exemptions to the requirement for OIO consent to acquire residential land.
Australia and Singapore
- Australian citizens and Singaporean nationals;
- Australian and Singaporean permanent residents who are ordinarily resident in NZ;
- certain Australian and Singaporean enterprises or branches of overseas enterprises; and
- the Australian government.
- a residential tenancy with a fixed term of less than 5 years (including renewals); or
- a periodic lease (i.e. they can be terminated at will and have no certainty of term of 3 years or more).
- Off-plan apartments: The overseas person buys an off-plan apartment in a large apartment development (20+ apartments) before it is complete and the developer has obtained an exemption certificate.
- Hotel units: The overseas person acquires an interest in a hotel unit in a large hotel (20+ units) and that unit is leased-back to the hotel company. This exemption only applies as long as:
- the overseas person does not use their hotel unit from more than 30 days in each year; and
- the overseas person must sell their hotel unit if the lease-back ends and is not renewed.
2. Significant business assets
- have the necessary business experience and acumen;
- have demonstrated financial commitment to the investment;
- are of good character; and
- are not individuals of the kind listed in sections 15 and 16 of the Immigration Act 2009 e.g. persons who have been imprisoned for criminal convictions.
CPTPP and other free trade agreement changes
Similarly, under the Hong Kong Closer Economic Partnership, the Korea Free Trade Agreement and the China Free Trade Agreement (all in force), the same threshold increase shall apply to non-government investors from China, South Korea and Hong Kong.
Good character threshold
3. Fishing quota
- whether the criteria for investment in significant business assets (see above) are met;
- whether the relevant overseas person is a body corporate;
- whether the interest in the fishing quota is capable of being registered in the Quota Register or the Annual Catch Entitlement Register; and
- whether the granting of consent is in the “national interest”.
- whether the overseas investment will, or is likely to, result in increased processing of NZ fish, aquatic life, or seaweed; and
- any other factors set out in the Regulations or that the Minister of Finance and the Minister of Fisheries think fit, having regard to the circumstances and nature of the application.
Process for obtaining consent
Preparing the application
Contents: There are detailed criteria for consent applications. These are more detailed for land applications than non-land applications. An application must cover all of the criteria, including required supporting documentation, and be signed by each applicant.
All applicants must show that the individuals controlling the overseas person are of good character and collectively have the business experience and acumen relevant to the investment. An investment plan is required for investments in sensitive land, including a business plan and other details required by the OIO.
- Sensitive land applications:
- residential land: NZ$2,040 to NZ$49,000;
- forestry activities and profits à prendre: NZ$34,100 to NZ$51,100;
- other sensitive land: NZ$22,500 to NZ$49,000;
- Significant business assets applications: NZ$32,000;
- Combined significant business assets and sensitive land applications: NZ$34,100 to NZ$54,000; and
- Fishing quota applications: NZ$40,000.
Consideration of the application
Decision and monitoring: Consent may be refused, granted without conditions, or granted subject to conditions. If conditions are imposed on the consent, consent holders will generally be required to report annually to the OIO for the first five years from the date of consent as part of the OIO’s monitoring programme.
Timing: The OIO is not required to make a decision within a specific time period but, as at 18 October 2018, worked to the following guidelines:
- within 10 working days for applications for a house to live in i.e. residential land (excluding non-individual applicants); and
- within 50 working days for all other new applications.
It is common for applications (particularly complex applications) to take longer than these targets – particularly if the OIO needs to request further information from the applicant or third parties (such as the Historic Places Trust), or ministerial approval is required.
How we can help
- advising whether consent is required;
- assisting with your application for consent or exemption, and to minimise any delays; and
- dealing with the OIO and assisting with requests for further information.
Disclaimer: The information contained in this publication is of a general nature and is not intended as legal advice. It is important that you seek legal advice that is specific to your circumstances.
All rights reserved © Jackson Russell 2018
Darryl King, PARTNER
David Alizade, PARTNER
Claire Godber, SENIOR ASSOCIATE