Immigration and the Overseas Investment Act

Posted on May 15, 2017 in Commercial , Property (Tags: Immigration, Overseas Investment, Commercial Law, Property Law) Commercial image.PNG

In April 2017 the Government announced a package of changes designed to better manage immigration and improve the labour market contribution of temporary and permanent migration.  Changes in immigration policy have a direct impact on the ability of non New Zealand citizens and residents to purchase certain land and business assets in New Zealand.  That tension has become more apparent with increased interest in New Zealand as a stable economic region in which to invest, as well as being perceived as a safe place to live.


Who is affected by the Overseas Investment Act and which investment assets are restricted?


The Overseas Investment Act restricts the ability of “overseas persons” to buy land which is “sensitive” and invest in businesses of a particular size unless consent is obtained from the Overseas Investment Office (“OIO”).  Application fees range between $22,500 and $49,000 for sensitive land applications and between $32,000 and $54,000 for investments in significant business assets, depending on whether or not sensitive land is involved.  It is therefore important for the applicant to do their homework before making an application as the fees are not refundable.  One recent development by the OIO is to introduce a pre-application meeting process which can assist in determining the likelihood of consent being given.


Overseas persons are generally individuals, or entities controlled by individuals who are not New Zealand citizens or resident in New Zealand.  In order to meet the test of being “ordinarily resident” in New Zealand you must hold a residence class visa and be domiciled or residing in New Zealand with the intention of residing here indefinitely, and have done so for the immediately preceding 12 months.  Person who are domiciled in New Zealand may be absent from New Zealand for no more than 183 days in aggregate in the previous 12 months.  Persons holding a temporary visa such as a visitor’s visa, student visa or work visa are excluded from the qualifying category and would be regarded as overseas persons. 


The restricted assets are divided into sensitive land assets and business assets.  Sensitive land includes non-urban land which exceeds 5 hectares in area (typically lifestyle blocks) and land which is more than 0.4 hectares in area and includes, for example, the bed of a lake, conservation land, certain parks and reserves, and land subject to Historic Places Trust classification or heritage order.  Any land on certain offshore islands or land including foreshore or seabed is sensitive irrespective of the area of the land.  Land can also be sensitive due to its proximity due to certain types of land such as those listed above.  For example, land which adjoins a reserve, esplanade strip, road or Maori reservation which in itself is next to the sea or a lake is sensitive if it exceeds 0.4 hectares in area.


Investments in companies which own sensitive land also trigger the requirements for consent if the investor is an overseas person so it is important to consider this when undertaking due diligence for transactions involving overseas persons. 


Acquisitions of business assets are only caught if the consideration exceeds $100 million so will generally not restrict investment in businesses in the southern region unless sensitive land is involved.


What is required to obtain consent?


The requirements for consent are relatively complex and expert advice is definitely recommended if an application is necessary.  All applications involve consideration of the investor test which has four key criteria:


  • Business experience and acumen.
  • Demonstrated financial commitment.
  • Good character.
  • Absence of ineligible individuals under the Immigration Act 2009.


What is required to meet these criteria depends on the nature of the investment contemplated.  They are directed at the entities and individuals behind an investment such as the directors and shareholders of a company or the beneficiaries of a trust.


For sensitive land applications, if the persons behind the investment cannot show that they are New Zealand citizens, ordinarily resident in New Zealand or intending to reside in New Zealand indefinitely, they have to show that the overseas investment will benefit New Zealand, as dictated by the criteria under the Act.  If the sensitive land is non-urban land that exceeds 5 hectares, then that benefit will need to be substantial and identifiable.  That threshold is very difficult to meet unless there is a significant business operation connected with the land and where it can be shown that purchase of the land by the overseas investor will provide a significant and identifiable benefit to New Zealand as opposed to the alternative.  For example, in the recent decision regarding Hunter Valley Station, there were numerous conditions regarding public access for walking, cycling (including the Hawea Epic Cycling Race), capital expenditure requirements for hay barns, yards, housing upgrades, capital fertiliser and land development and certain environmental protection measures.


Elaborate schemes to get around the terms of the Act are actively discouraged and carry criminal sanctions as well as financial penalties.  Given the appeal of lifestyle properties and waterfront properties in New Zealand to wealthy overseas investors, it is important that developers and those working with overseas persons are mindful of the restrictions of the Act.



Sally Peart is a partner in Marks & Worth Lawyers and has expertise in the Overseas Investments Act

Sally Peart