Screening of Residential Land: Questions and Answers

Transcription

1 Screening f Residential Land: Questins and Answers Wh des the plicy apply t? 1. Wh des the plicy apply t? The plicy applies t all verseas persns, with sme exceptins. Specifically: New Zealand citizens will cntinue t be able t purchase hmes in New Zealand, regardless f where they reside. New Zealand permanent residents and ther residence class visa hlders that are rdinarily resident in New Zealand will cntinue t be able t purchase hmes in New Zealand withut requiring cnsent. Fr residential land purchases we cnsider smene t be rdinarily resident if at the time the persn enters an uncnditinal cntract fr sale and purchase, they have a residence-class visa, have resided in New Zealand fr the last 12 mnths and were present in New Zealand fr at least 183 days in that perid, and are tax resident in New Zealand as defined in the Overseas Investment Act. Australian and Singapre citizens and permanent residents will be treated the same way as New Zealand citizens and permanent residents, respectively. This exemptin has been granted t avid a cnflict with the Clser Ecnmic Relatins agreement with Australia and ur Clser Ecnmic Partnership agreement with Singapre. If the current number f Singapre buyers materially increases the tw cuntries have agreed t meet t discuss the cause f the increase and hw t address it, if required. Other persns will be able t purchase sensitive land that is residential land (but nt land that is sensitive fr any ther reasn) fllwing screening by the Overseas Investment Office (OIO) if they can demnstrate (in each case subject t cnditins): a cmmitment t reside in, and becme tax resident in, New Zealand; r that they will increase the husing supply thrugh their investment; that they will be purchasing residential land fr cnversin t a nnresidential use, r a residential use incidental t a relevant-business use; r the develpment will be beneficial t New Zealand. 21 June 2018 Released at

2 2. Hw will the plicy apply in relatin t cmpanies, trusts and ther crprate structures? Will cmpanies that are registered n the New Zealand Stck Exchange be able t purchase residential land? In general terms, any cmpany, trust, bdy crprate r ther legal entity will be subject t the regime fr purchases f sensitive residential land if they are 25 per cent r mre beneficially wned r cntrlled by verseas persns. These rules will apply regardless f whether an entity is incrprated r established in New Zealand, r listed n the New Zealand Stck Exchange. Cmpanies registered utside New Zealand will als be treated as verseas persns and need cnsent t purchase residential land. These rules als apply t family trusts. If verseas persns cntrl 25 per cent r mre f the decisins f the trust r 25 per cent r mre f the trusts beneficiaries are verseas persns, the trust will als be subject t the screening regime. 3. What abut peple in New Zealand n temprary visas r that d nt meet the definitin f rdinarily resident in New Zealand? Will they be able t purchase hmes in New Zealand? Peple that are nt New Zealand citizens r residence class visa hlders r Australian r Singaprean citizens and permanent residents will nly be able t purchase residential land fllwing screening by the OIO. The Bill allws Permanent Resident and Resident Visa hlders that are nt rdinarily resident (such as thse wh have nt resided in New Zealand fr at least 12 mnths) but are cmmitted t reside in New Zealand t apply fr cnsent t buy a hme t live in. Peple that can demnstrate that they have a cmmitment t reside in New Zealand will be able t purchase ne hme fr use as their principal place f residence in New Zealand, which they will be required t sell if they leave New Zealand and sever their cmmitment t reside in New Zealand. It is nt intended that Student Visa and ther Temprary Visa hlders will be able t use this pathway fr cnsent. Peple falling int this categry will still be able t rent residential prperties fr fixed terms less than five years r under peridic tenancies. They will als be able t apply fr cnsent t build new hmes t n-sell r cnvert t anther use.

3 4. What if I m a freign develper that wants t invest in new husing supply? The Bill prvides develpers wh are verseas persns with the pprtunity t btain cnsent t acquire residential land where this supprts verall husing supply. In particular, verseas develpers are able t btain cnsent t purchase residential land where: they will increase the husing supply thrugh their investment and cmmit t sell the prperty/prperties nce cnstructin is cmplete; r they build r expand a retirement village, an aged care facility, student accmmdatin r similar lng-term accmmdatin facility. In these circumstances the develper can retain, lease r perate the facilities (but nt reside in them) nce cnstructin is cmplete. In additin t these general rules, t prvide particular supprt fr large residential develpments, the Bill allws: develpers f large apartment cmplexes (that is, multi-strey buildings f at least 20 units each), recgnising the imprtance f pre-sales t the viability f such develpments: t sell units t verseas persns ff-the-plans. The purchaser f the unit will need t apply fr cnsent, but nt satisfy the investr test, and cmply with a number f cnditins including selling the unit shrtly after cnstructin is cmplete; and t apply fr an exemptin certificate that allws them t sell a prtin f thse units (up t 60 per cent, with this t be cdified in regulatins) t verseas persns ff-the-plans withut the purchaser being required t btain cnsent r t n-sell the unit nce cnstructin is cmplete. Further, develpers f ther large residential prjects (f at least 20 dwellings) t retain a lng-term interest in these develpments if they are maintained as rental prperties r made available t purchase under a shared-equity r rent-t-buy scheme.

4 5. What d I need t cnsider when thinking abut applying fr an exemptin certificate? Ministers, r the OIO under delegatin, are respnsible fr assessing applicatins fr an exemptin certificate. Certificates are t be granted where: the cmplex is f ne r mre multi-strey buildings with at least 20 units each; and Ministers are satisfied that the prpsed develpment is likely t be cmpleted having regard t factrs such as yur financial strength and histry in delivering similar prjects. Obtaining an exemptin certificate will streamline the prcess fr yu t make pre-sales t verseas persns by: remving the need fr verseas persns t apply fr cnsent r when purchasing units ff the plans (subject t the regulatry cap n the share f units available t be sld in this way); and nt requiring the verseas purchaser n-sell the unit after cnstructin is cmplete. Imprtantly, even where yu hld an exemptin certificate, sales t verseas persns beynd the regulatry cap in place at the time will remain subject t n-sale cnditins and the need fr the verseas persn t btain cnsent (althugh withut thse verseas persns being subject t the investr test ). 6. What cnditins will be impsed n me, and verseas persns that purchase units in my qualifying develpment, if I hld an exemptin certificate? As an exemptin certificate hlder, yu will be respnsible fr ensuring that yu d nt sell mre than the percentage f units specified in the regulatins available t verseas persns withut an n-sell cnditin. Nn-cmpliance with this requirement will be an ffence. Exemptin certificates are made subject t cnditins. The Ministers must impse cnditins: requiring that the exempted unit wners (and certain ther peple) cannt reside in the units they wn; and enabling the OIO t identify and mnitr the dwellings t which the certificate has applied, and cmpliance with the nn-ccupatin utcme. The Bill empwers Ministers t impse further cnditins n yu and the unit wners when necessary t supprt the integrity f the regime.

5 7. I m an verseas persn, hw can I btain cnsent t purchase a unit in an apartment cmplex? In all cases, yu can buy a planned, new r existing unit in an apartment cmplex under the cmmitment t reside in New Zealand cnsent pathway, discussed elsewhere. If yu are buying a unit ff-the-plans, rather than a pre-existing unit, the requirements yu face befre yu can purchase an apartment will differ depending n whether the develper f the cmplex hlds an exemptin certificate r nt. If the develper des hld an exemptin certificate, the requirements yu face will differ depending n the share f units in that develpment that have already been sld t verseas persns. Regardless f the develper s circumstances, yu will nt be allwed t reside in the unit and may be required t prvide yur details t the Overseas Investment Office at the time the purchase is cmpleted. Yu will be able t purchase and retain an interest in the unit withut applying fr cnsent if: the cmplex yu are lking t buy int is cvered by an exemptin certificate; and the develper has sld fewer units t verseas persns withut n-sell cnditins than allwed under that certificate (with the limit initially set at 60 per cent). If the develper has already sld the maximum number f units available t verseas persns withut cnsent, irrespective f the fact that the develper hlds an exemptin certificate yu will need t get cnsent t buy a unit ff-the-plans. Yu will als be required t n-sell the unit it shrtly after cnstructin is cmplete. Finally, under the prpsed regime yu will als be able t btain cnsent t purchase a unit in an apartment cmplex where the develper des nt hld an exemptin certificate. Hwever, yu will be required t n-sell the dwelling shrtly after cnstructin is cmplete. In either f these last tw scenaris, yu will nt need t pass the investr test as part f the cnsent prcess.

6 Table 1: Cnsent requirements fr verseas persn acquiring an interest in a unit ff-the-plans in a large apartment develpment Scenari 1: Develper hlds an exemptin certificate Scenari 2: Develper des nt hld an exemptin certificate Purchase ff-the-plans units 1 t 60 Purchase ffthe-plans units 61 t 100 Purchase ff-the-plans units 1 t 100 Des the verseas persn need t btain OIO cnsent t purchase a unit? N. Hwever, the develper must apply t the OIO fr the exemptin certificate. The develper must prvide the verseas buyer s details t the OIO. The OIO may als require the buyer t prvide their details as well. Yes Yes Des the investr test apply? Are n-sell cnditins impsed? N N N N Yes Yes 8. What if I m an verseas persn that wants t invest in a htel develpment? T ensure that the new regime des nt unnecessarily impede the develpment f new htels, an exemptin frm the need t btain cnsent fr verseas persns will apply where: the htel has at least 20 units the unit purchaser enters a lease-back arrangement with the htel s peratr/develper at the pint f sale (and t remain in place fr the duratin f the wnership); the unit is generally used as a htel rm; and the unit cannt be ccupied by the wner fr mre than 30 days per year.

7 Imprtantly, even with this exemptin in place, if the htel develper was an verseas persn they wuld need t btain cnsent t acquire the residential land the htel was t be built n. Hwever, the htel develper/peratr is exempted alng with the unit purchaser fr its interest in the lease-back arrangement. Nte that the regime des nt apply where the land and the units are nt classified as residential. 9. What if I m an verseas persn wh already wns a huse? The Overseas Investment Amendment Bill will nt interfere with the rights f existing hme wners t use and enjy their prperties. This is an imprtant principle. It will, hwever, restrict wh existing hmewners can sell r in sme cases lease their prperties t. It will als restrict an verseas persn s ability t make any subsequent purchases f sensitive land that is residential land where the apprval criteria are nt met. 10. Will verseas persns still be able t rent? Yes. Overseas persns will cntinue t be able t rent in New Zealand. Hwever, if a lease ver residential land is fr a fixed term f five years r mre (including rights f renewal), the verseas persn taking the lease will require cnsent frm the Overseas Investment Office. 11. What if I inadvertently sell my prperty t an verseas persn withut the apprpriate cnsent? Cmpliance with the Overseas Investment Act remains the primary bligatin f the acquirer f sensitive land with sme bligatins impsed n cnveyancers, where they are used, t supprt the regime s integrity. As such, there wuld be n cnsequences fr yu under the regime if yu were t inadvertently sell yur prperty t an verseas persn that did nt have the apprpriate cnsent.

8 What types f prperty are cvered? 12. What land is cvered by this plicy? Des it apply t apartments/lifestyle blcks/bare land/hliday hmes? The plicy will apply t suburban residential sectins, apartments in apartment buildings, and als t lifestyle blcks. The plicy applies whether r nt a huse is built n the land. Generally, hliday hmes and baches will be caught by the plicy as well. Strictly speaking, the plicy applies t all land that is classified as residential r lifestyle fr District Valuatin Rll purpses. Assigning a categry t a prperty is smething that is dne as part f a cuncil s ratings prcess. A lifestyle prperty is land that is larger than an rdinary residential sectin, generally in a rural area, and where its predminate use as a place f residence. Farming the land in the traditinal sense is nt ecnmic. 13. Hw can I find ut if my prperty is cvered by the plicy? A prperty s classificatin can be btained frm varius prperty-infrmatin websites. 14. Des the plicy apply t newly built huses? Yes, the plicy applies t newly-built hmes. An verseas persn will be able t apply t the OIO fr cnsent t buy ff-the-plans (where a prperty is purchased frm a develper befre a huse is cnstructed n it), prvided the verseas persn n-sells the prperty nce cnstructin has finished unless the dwelling: is a unit in a large apartment cmplex where the develper hlds an exemptin certificate; r is part f a develpment f at least 20 dwellings and will be maintained as a rental prperty r n a shared-equity basis. In bth f these cases a cnditin f cnsent t acquire the prperty is that n verseas persn resides in the prperty, unless they have either: btained cnsent frm the OIO; r bth: the land is being ccupied under a lease (r ther cntractual arrangement) n arms length terms; and the ccupant has n beneficial interest r entitlement t the dwelling r any prceeds f the dwelling.

9 This is t prevent the circumventin f the regime thrugh, fr example, a parent acquiring an investment prperty and then: allwing their child t live in it rent free; r charging rent but repaying it t the child making the child, in effect, the prperty s beneficial wner. An verseas persn wh has cmmitted t reside in New Zealand will als be able t apply t the OIO fr cnsent t buy a newly built huse t live in. Hw des the plicy wrk? 15. Hw d I knw if I am an verseas persn? Part 1 f the Overseas Investment Act defines verseas persns. This Act can be fund here: In respect f the acquisitin f sensitive residential land, additinal exemptins will be made fr Australian and Singaprean citizens and permanent residents, as well as certain enterprises. 16. Can a freign cmpany buy huses fr its New Zealand-based staff? The changes in the Bill mean that freign cmpanies will nly be able t buy residential prperties fr their staff t live in if the use f the land fr residential purpses is incidental t a relevant business purpse (fr example, accmmdating pilts at a remte airprt). In determining whether t prvide cnsent fr such an arrangement, Ministers (r the OIO under delegatin) wuld cnsider the fllwing factrs: prximity f land t the relevant business; whether the residential land wuld be used in supprt f the relevant business, where the relevant business is nt itself the use f land fr residential purpses; whether acquisitin f residential land fr the intended purpse was part f the applicant s rdinary curse f business ; and whether n reasnable alternative existed t the purchase f the residential land by the applicant. If cnsent was granted, cnditins wuld als be impsed n the land t ensure that it was used cnsistent with the business case utlined in the applicatin. Freign cmpanies will als still be able t rent residential prperties fr their staffprvided residential leases are fr less than five years, r leases f ther sensitive land are less than three years withut the need t btain OIO cnsent.

10 17. If my partner is an verseas persn, can we buy residential land as relatinship prperty? Yes. Cnsistent with existing exemptins in the Overseas Investment Act, New Zealand citizens and thse that meet the definitin f rdinarily resident in New Zealand that are in a qualifying relatinship with an verseas persn (that is, a marriage, civil unin partnership r de fact relatinship) with an verseas persn will be able t purchase residential land withut the need fr their partner t btain cnsent. Qualifying relatinships are marriages, civil unin partnerships and de fact relatinships. This exemptin frm the need fr ne member f a cuple t btain cnsent when they wuld be required t d s if they were purchasing land as a single persn extends t all cuples where at least ne member is eligible t purchase residential land in New Zealand (with r withut cnsent). Fr example, if a cuple was cmprised f a New Zealand permanent resident (wh was nt rdinarily resident in New Zealand) and an verseas persn that wanted t acquire a residential dwelling as relatinship prperty, the permanent resident wuld be able t btain cnsent under the Cmmitment t Reside in New Zealand pathway (and be required t cmply with the cnditins f that cnsent). Their partner wuld nt have t btain cnsent frm the OIO r cmply with any nging cnditins. 18. What des this Bill mean fr me if I am an verseas persn that inherits residential land in New Zealand? Inheritance f residential land is exempt frm the need fr cnsent, whether inheritance by and/r frm an verseas persn. If yu inherit residential land frm anther verseas persn that held it subject t cnditins, thse cnditins may transfer t yu if yu wish t retain an interest in the prperty. 19. Can a freign cmpany buy residential land fr nn-residential purpses? Yes. The Bill intrduces a new streamlined cnsent pathway fr verseas persns t btain cnsent t purchase residential land fr nn-residential purpses, fr example perating a business. In granting cnsent, Ministers need t be satisfied that the residential land will be used fr nn-residential purpses in the rdinary curse f business fr the relevant business, and nt used r held fr any residential purpses. Under this pathway t receive cnsent the purchaser wuld nt need t satisfy the existing benefit t New Zealand test. Hwever they wuld need t satisfy the investr test (requiring them t demnstrate, amng ther factrs, that they are f gd character and have sufficient business acumen t supprt the investment being made).

11 Certain utilities service prviders specifically, telecmmunicatins prviders, electricity and gas distributrs and transmissin netwrk peratrs will be able t btain residential land fr the purpse f their business withut the need t btain cnsent. Freign cmpanies will als retain the ability t acquire sensitive land f any type including residential land if they can satisfy the existing benefits t New Zealand test. Additinal infrmatin n this test can be fund here: What happens if I breach my cnditins? Penalties fr breaching cnditins can include a fine, a civil penalty, r being required t dispse f prperty. 21. What happens if I need t breach my cnditins due t a change in my circumstances? Generally, yu can apply t the OIO fr a variatin f certain cnditins. Cnsents granted under the cmmitment t reside in New Zealand pathway require cnsent-hlders t be present in New Zealand fr a certain prtin f each year. If yu need t be absent frm mre than 183 days in a 12-mnth perid after cnsent has been granted (fr example, due t persn illness r the illness f a family member), yu will be able t apply t the Minister (either in advance f leaving New Zealand r n return) fr a waiver, allwing this additinal time away withut creating a trigger event. Fr this t ccur, hwever, Ministers wuld need t be satisfied that, despite yur absence, that yu have nt severed yur cmmitment t reside in New Zealand. Alternatively, this event culd be reslved by yu being present in New Zealand fr mre than 183 days in the next 12-mnth perid frm the date f yur absence. 22. What happens if I receive a dispsal ntice frm the OIO fr breaching my cnditins f cnsent? The Act empwers the OIO t issue a dispsal ntice t an verseas persn that it believes has either: cntravened the Act (fr example, by acquiring sensitive land withut the requisite cnsent), cmmitted an ffence under the Act, r beached the cnditins f a cnsent. If yu receive a dispsal ntice, yu are nt required t dispse f the relevant prperty. Hwever, if yu agree t a dispsal ntice and d dispse f the prperty yu can be deemed t nt be liable fr any breach f the Act that yu may have cmmitted (except in specific circumstances).

12 Alternatively, if yu d nt cmply with the dispsal ntice this wuld nt cnstitute an additinal ffence, hwever yu wuld be liable t be prsecuted in respect f any breach f the Act that yu may have cmmitted. 23. As a cnveyancer, what are my respnsibilities t ensure that any f my clients perate cnsistently with the Act? Cmpliance with the Overseas Investment Act remains an bligatin primarily n the acquirer f sensitive land. T help ensure, hwever, that peple are aware f their requirements under the Act the Bill des impse requirements n bth cnveyancers and purchasers f residential land (where a cnveyancing service is used). In particular: purchasers acquiring certain interests in residential land (where an instrument in respect f the acquisitin will be ldged) must prvide a statement abut whether the transactin requires cnsent under the Act and, if s, hw the requirement will be cmplied with (with any false r misleading statement cnstituting an ffence); and yu must btain such a statement, and must nt have reasnable grunds fr believing it is nt crrect in a material particular, befre yu cmplete the cnveyancing fr an verseas persn acquiring residential land. Yu must als retain the statement fr seven years. If yu fail t meet yur bligatins as a cnveyancer, yu culd be fined up t $20, Hw will the OIO enfrce the law? The OIO has extensive experience in enfrcing the Overseas Investment Act and has a range f infrmatin gathering pwers t assist it in identifying cntraventins f the law. This Bill empwers the OIO t gather infrmatin frm individuals necessary t mnitr cmpliance with, investigate cnduct that cnstitutes r may cnstitute a cntraventin (r an invlvement in a cntraventin) f the Act, as well as enfrcing the Act and the regulatins. 25. Will there be any fees payable if I apply fr cnsent under ne f the new pathways? Yes, cnsistent with current practice, the Overseas Investment Office will perate n a cst recvery basis and charge fees cmmensurate t its csts. The Gvernment and Overseas Investment Office are currently wrking t update the fee schedule cntained in the Overseas Investment Regulatins. The Gvernment expects t annunce the fees assciated with the new regime in August 2018.

13 When will these changes take effect? 26. When des this take effect? The new screening regime fr residential land is expected t cmmence n 22 Octber 2018 (that is, tw mnths after the legislatin received Ryal assent). The legislatin des allw fr the regime (r parts f it) t ptentially start n an earlier date. Hwever, the Gvernment has n intentin f exercising its pwer t start the regime prir t 22 Octber 2018 at this time as the Cmprehensive and Prgressive Agreement fr Trans-Pacific Partnership is nt expected t enter int frce befre this date. 27. Hw des the regime affect me if I am an verseas persn in the prcess f purchasing a huse when the regime cmmences? The new screening requirements nly apply t transactins entered int n r after cmmencement (that is, 22 Octber 2018). As a result, if yu have already entered int a cntract r agreement (whether r nt this is subject t certain cnditins being met) t purchase residential land when the regime cmes int frce, the new requirements will nt apply t yur purchase. Cnversely, if yu d nt enter a cntract t purchase a prperty until after the regime has started, yu will generally be required t btain cnsent. The changes t the screening f purchases f residential land by verseas investrs will take effect as sn as the relevant prvisins f the Bill cme int frce. This will be n later than 60 days after Ryal assent is received. Timing fr this is expected t be cnfirmed in the third quarter f I have entered int a sale and purchase agreement prir t the Bill being enacted. Hw will I be affected? The Bill will nly apply t transactins entered int n r after cmmencement f the new legislatin.

14 29. Has the Bill gne t Select Cmmittee / was there an pprtunity fr public t submit n this? Yes. The Bill has gne thrugh a Select Cmmittee prcess. As part f this prcess, the Select Cmmittee invited written and verbal submissins. The Cmmittee received 213 submissins n the prvisins f the Bill relating t the prpsed residential screening regime. A number f submitters made supplementary submissins. Individuals were respnsible fr 138 submissins. 61 submissins were received frm private sectr businesses and grupings. Ten submissins were received frm nngvernmental rganisatins and fur submissins were received frm versight bdies. Key areas cvered in submissins included: wh shuld have t apply fr cnsent t purchase a hme t live in (including distinctins between permanent resident visas and resident visas and the treatment f investr migrants). The effect f requiring individual verseas persns t sell prperty purchased ff the plans n the viability f new develpments as well as the impact f requiring develpers t sell newly develped prperty n build-t-rent, rent-t-buy, and shared equity mdels. The effect f the prpsed rules n cmmercial develpments and related cre businesses, including supermarkets, retailers, htels, utilities peratrs, staff accmmdatin and buffer land. Requests fr exemptins fr: retirement village peratrs, luxury hmes, cmpliance with resurce cnsent cnditins and a variety f ther purpses. Cmpliance and enfrcement issues, including the requirement that cnveyancers give certificates, infrmatin-gathering pwers and third party accessry liability. Transitinal issues and cmmencement dates, including cncerns abut the need fr the OIO t be resurced, and t have adequate time t prepare and be able t implement the Bill in a way that minimises disruptins t prperty transactins.

15 30. If I have additinal questins wh shuld I raise these with? The Overseas Investment Office will be respnsible fr the administering the residential screening regime. This is cnsistent with its respnsibilities in administering the Overseas Investment Act. Once the regime has cmmenced, questins abut its peratin can be directed t the Overseas Investment Office. The Office can be cntacted at custmersupprt@linz.gvt.nz r by phne at The Land Infrmatin New Zealand website als includes a range f infrmatin t supprt individuals in understanding New Zealand s freign investment regime. This can be fund here: