Selling property to an overseas buyer

When selling property to buyers outside New Zealand, there are rules you need to be aware of under the Overseas Investment Act 2005 (OI Act).

Who does the OI Act cover?

People who are not New Zealand citizens, or are not ordinarily resident in New Zealand, need to get consent under the OI Act through the Overseas Investment Office (OIO) to buy or enter into a long term lease of certain property.  To be considered ‘ordinarily resident’ a person needs to:
  • hold a resident class visa and 
  • be domiciled here or have resided in New Zealand for the previous 12 months (usually for more than 183 days) with the intention of residing here indefinitely.
The OI Act applies to companies, partnerships, trusts and other entities where an overseas buyer has 25% or more of the ownership or control. The OI Act also captures New Zealand associates, such as someone acting on behalf of an overseas person or acting together with an overseas person, to buy land.  For example, if an overseas buyer has a child who is a New Zealand citizen, they cannot have that child buy property on their behalf without consent. 

What does the OI Act apply to?

Overseas buyers require consent to buy or lease certain types of land for 3 years or more.
   
A full list of the types of land that the OI Act applies to is set out in Schedule 1 of the Act.  Land needs to be of a certain size and either have a particular characteristic or feature, or adjoin something with a particular feature.  

Examples of where consent is required include:
  • non-urban land (usually rural in nature) that is greater than 5 hectares – this will include some lifestyle properties
  • land on particular islands that is over 0.4 hectares, such as on Waiheke Island
  • land with or adjoining a lakebed that is over 0.4 hectares
  • land with foreshore or seabed or adjoining foreshore – any land that has foreshore or seabed as part of it requires consent, but land adjoining foreshore will need to be 0.2 hectares or more – for instance, land along waterfront in Auckland and Wellington may be captured
  • land with or adjoining particular reserves or parks that is 0.4 hectares or larger – this can capture land in cities where a property adjoins, for instance, a regional park under the Local Government Act or an historic reserve administered by the Department of Conservation under the Reserves Act
  • land which is, or adjoins, an historic place or subject to a heritage order that is 0.4 hectares or more – for instance if a farm has an historic pa site on it.​

It is a common misunderstanding that the OI Act only applies to rural land, but, as the examples above show, it can apply to land in urban areas.

What does an overseas buyer need to do if they want to buy land covered by the Act?
An overseas buyer must seek consent through the OIO. They must get consent before they buy the land, although an agreement can be conditional on obtaining consent.

There is more guidance on the OIO’s website about how this can be done.  The buyer must provide information, including information about their good character and their investment plans, and pay an application fee.

The OIO recommends that prospective buyers get advice from a lawyer who has experience in this area before entering the transaction. 

ADLS form

The standard ADLS sale and purchase agreement requires a buyer to indicate whether the OI Act applies to the transaction. Care is needed as a purchaser warrants whether or not consent is required.

What happens if an overseas buyer purchases land without consent?

Several things could happen if a buyer outside New Zealand buys land without consent, including:
  • the transaction may be cancelled, either by the OIO or another person, such as the vendor, applying to the High Court
  • the purchaser may be required to dispose of the property 
  • the person may be subject to a fine or even imprisonment.
It is a criminal offence to try to get around the OI Act, and penalties could also apply to someone who assists someone to do so.

It may sometimes be possible to obtain retrospective consent for inadvertent breaches of the OI Act. There is more information on the OIO's website about whether a retrospective application might be appropriate.

More information

There is more information about how the OI Act applies on the OIO’s website.

The OIO has recently published guides in English, Chinese, Korean and Spanish. These include basic information about the requirements under the OI Act for buying some types of New Zealand land.