The Bill will become law on the date specified by the Governor General by Order in Council or two months after the Bill receives Royal assent, whichever is earlier.
Amendments by the Finance and Expenditure Committee (‘Committee’)
Following its review, the Committee has produced an amended version of the Bill. Important amendments include:
1. Expanding the pool of ordinary residents: the Bill has been amended so that resident visa holders are not required to obtain the consent of the OIO to purchase residential land.
2. Supporting large developments: the Bill has been amended to provide that developers of large multi-storey apartment buildings of 20 or more units can apply for an exemption to sell a percentage of units to overseas buyers “off the plans” without the need to obtain consent on the basis that those buyers do not occupy the units themselves. This is to allow developers to raise funds and satisfy financiers that a project is viable.
3. Exemption to overseas investors purchasing hotel units: in response to the shortage of hotel accommodation in New Zealand and to prevent financial investment in hotels being discouraged, the Committee has amended the Bill so that overseas investors may purchase and continue to own any number of units in hotels with 20 or more units, provided they enter into a lease-back arrangement with the hotel’s developer or operator. The room must be used for operating the hotel and the overseas investor may not reside in it for more than 30 days in a year.
4. Exemption for network companies: submissions on the Bill highlighted that network providers (which are principally overseas-owned) would be required to obtain consent for purchasing residential land required for network infrastructure, such as cell towers and substations, despite such services being essential to New Zealand. The Committee has included an exemption for network companies who are not required to obtain the consent of the OIO for acquisitions of residential land where the land is acquired for the purposes of utility services.
5. Leases and periodic tenancies: the Bill provides that short term leases of residential land with terms of three years or more require the consent of the OIO. Submitters noted that short term student accommodation could be caught under this requirement. The Committee has amended the bill so that overseas persons may take leases for up to five years over residential land without needing to obtain the consent of the OIO. The Bill now also provides that periodic leases (including residential tenancies) do not require the consent of the OIO.
6. Streamlined approval path: a streamlined approval process has been included in the Bill, to allow businesses to purchase residential land for non-residential purposes or for residential purposes to support a business. Such purchases would not be subject to a counterfactual analysis, but would be subject to conditions imposed by the relevant Minister to ensure that the land is being used for the purpose it was purchased.
7. Reducing the burden on conveyancers: the original version of the Bill provided that conveyancers were required to certify that a purchaser was not committing an offence under the Act. Conveyancers could be liable on conviction to a fine of up to $20,000 for failure to comply with this requirement. The Committee considered the burden placed on conveyancers to be too high and has amended the Bill to provide that purchasers are required to provide a statement to conveyancers that the transaction does or does not require consent under the Act. A conveyancer is not permitted to effect a transfer without such a statement.
What will the new Act look like?
By way of summary, and on the basis that no major amendments are made following Third Reading, the main changes to the Act are as follows:
1. Overseas investors will need to obtain the consent of the OIO prior to acquiring residential land where specified exemptions do not apply. To obtain consent, overseas investors must demonstrate that a number of tests are satisfied.
2. Overseas investors will need to obtain the consent of the OIO prior to acquiring forestry rights and other profits à prendre where specified exemptions do not apply.
3. ‘Standing consents’ may be obtained for future acquisitions of residential or forestry land where specific requirements are met.
4. OIO consent will be subject to automatic conditions (which apply to every consent) and may be subject to other specific conditions specified in the Bill if certain tests are met.
5. Lawyers and conveyancers will be required to obtain a statement from purchasers that a transaction does or does not require consent under the Act before effecting a transfer of residential land.
While the Bill is yet to become law, we don’t anticipate that there will be any further changes made following the Third Reading stage.
Regulations, which are anticipated to add further clarity to a number of aspects of the Bill, are also yet to be produced, so there are further changes to come.
Obviously the Bill is designed to have a major impact on overseas purchasers of New Zealand residential land. It will also have a significant effect on developers and funders of projects involving residential land.
The Bill is technically complex and detailed analysis will be required to determine whether consent is required for acquisitions by overseas investors, and on what basis it may be obtained.
We acknowledge the assistance of Brittany Montague, Associate in writing this Newsflash.