Is it a sensitive sale?
Farmer Freddy learns about selling sensitive land and the criteria needed to satisfy the OIO
Farmer Freddy and his daughter, Pebbles, a lawyer, are sitting down to dinner. Freddy tells her that he's about to sign an agreement to sell the one of the lifestyle blocks he's subdivided out of the farm.
"That's great, Dad," replies Pebbles. "Any issues with the contract?"
"There don't seem to be," replies Freddy. "The buyer said she hasn't talked to a lawyer about it, but she didn't seem too concerned. And she's really keen for a quick settlement."
"Where's she from?" asks Pebbles.
"Sydney, I think. But she's planning to move here once she's built on it."
"Hmmm. That may cause a few problems with the Overseas Investment Act," says Pebbles.
"Unless she's a New Zealand citizen or ordinarily resident in New Zealand, she needs consent to invest in sensitive land."
"What?" exclaims Freddy. "It's only six hectares of farmland. What's so sensitive about it?"
"Well, any area of non-urban land greater than five hectares is sensitive land under the act. Some other kinds of land can be sensitive, too, like land that adjoins the foreshore, reserves or DOC land," Pebbles explains.
"So what does that mean for me?" asks Freddy.
"Well, provided she is an overseas person, she'll need to apply to the Overseas Investment Office (OIO). The criteria, which are set out in the act, include things like being of good character and being financially committed to the investment. The key criteria, though, are that she has relevant business experience and acumen, and either that she intends to reside her permanently, or the investment will benefit New Zealand.
"Can the OIO give consent?" asks Freddy. "Don't Ministers make the final decisions?"
"Only on major investments," replies Pebbles. "For small investments like this, they will have delegated their decision-making power to the OIO itself."
"Look Dad, don't get too concerned. The criteria aren't that difficult to satisfy in a case like this. It would be harder if she didn't have definite plans to move here soon; the test about benefiting New Zealand is not so easy to satisfy."
"That's all very well Pebbles, but these things take time," says Freddy. "What happens if we conveniently forget about the need to get consent? Wouldn't that be her problem?"
"It certainly would be a problem for her. She could be fined for making the investment without consent and she could also be forced to sell the property. But you might also find yourself in hot water for entering into a transaction where you know consent is required, but hasn't been obtained," replies Pebbles. "And anyway, if she provides the OIO all the necessary information, it aims to turn applications around within a couple of months."
"I suppose I should tell her to get some legal advice then" says Freddy.