As you may know buying or building a home in New Zealand is an exciting venture, but it comes with its own set of challenges. With recent changes in government and housing policy, it’s essential to understand the role of the Overseas Investment Office (OIO) and how it affects property transactions.
Key considerations for home buyers
What is the Overseas Investment Office (OIO)?
The OIO is responsible for regulating overseas investments in New Zealand. While its primary focus is on overseas investors (defined as anyone who is not a New Zealand citizen) looking to acquire sensitive land and/or assets and needing consent from the OIO, understanding its role can help New Zealand citizens and residents navigate the property market more effectively.
Do you need OIO consent?
As a New Zealand citizen or resident, you generally do not need OIO consent to buy residential property. However, it’s important to be aware of the rules if you have overseas connections or are considering joint investments with overseas persons.
Companies and trusts will be an ‘overseas person’ as defined by the Overseas Investment Act 2005 (the Act) where they meet certain thresholds under the Act. In broad terms, this includes where 25% or more of the control in an entity or trust is controlled by an ‘overseas person’.
What is the definition of sensitive land in relation to the OIO?
Schedule 1 of the Overseas Investment Act 2005 provides an exhaustive list of may be defined as ‘sensitive land’. Any type of land may be sensitive depending on size, type and what it is next including but not limited to marine and coastal areas, conservation land, lakebeds, land on New Zealand’s minor islands and residential land. If there is any doubt over whether a piece of land is sensitive or not, it is important to engage an expert to undertake a thorough assessment.
Other sensitive assets which may need consent from the OIO include (but not limited to):
- Forestry – For maintaining, harvesting, or re-establishing crops.
- Business Assets – Purchasing or investing (acquiring shares) in significant business assets over NZD $100 million.
- Fishing Quotas – Fishing quotes or an interest in fishing quotas.
- Leasing – Any lease that has a term of three years or more.
Common pitfalls to avoid
- Assuming Exemptions: Ensure you understand whether your specific situation requires OIO consent as exemptions do not always apply to New Zealand registered entities or trusts that are governed and owned by Australians or Singaporeans.
- Ignoring Legal Advice: Engaging with knowledgeable legal advisors can help you navigate the complexities of property transactions.
- Not attempt to structure your way around the Act: Not to search for ways to avoid the need for consent as the OIO can impose harsh financial penalties and order any investment / property transaction be unwound if a party is found to be in breach of the Act.
Key takeaways
Key takeaways for home buyers:
- Compliance: Ensure compliance with all relevant regulations, even if you are a New Zealand citizen or resident.
- Asset Classification: Be aware of the types of assets classified as sensitive and the specific criteria that must be met.
- Legal Advice: Engage with legal advisors to navigate the complexities of property transactions. This can help mitigate risks and make informed decisions.
- Engage with the OIO early: If you or an acquittance does require consent under the Act, engage with the OIO early to ensure there is no delay to the application.
If you are looking to build your investment portfolio, it’s crucial to stay informed about the OIO regulations, especially if you are not a New Zealand citizen and plan to invest in sensitive assets. Understanding these rules can help you make strategic decisions and avoid potential legal issues.
If you have any questions about the content in this article or require legal advice about buying or building a home, contact our property law team.
Special thanks to Associate Victoria Cole for preparing this guide.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
