Leases and the Overseas Investment Act

Farmer Freddy gets correct advice before leasing land


Enjoying the end of a long week, Farmer Freddy is enjoying a chat with Pebbles after evening tea

“Pebbles, do you remember when we discussed leasing some of land to Farmer Joe down the road?”

“I do Dad, that’s when I gave you all that great advice on lease terms. Did Joe go for it?” Pebbles asked.

“Well no, not really,” sighed Freddy. “But I’ve got great news!”

“You’re not selling the farm now are you Dad?”

“No. Even better than that; I’ve met someone else that wants to lease the lands and he’s going to pay top dollar!”

“That’s great Dad, who is it,” Pebbles queries.

“It’s an American chap that I met last week at a café.  He said he’s cashed up and wants to lease some pasture lands for the next five years as he and his wife enjoy the Taranaki region. And did I mention that he’ll pay top dollar?” Freddy was now bubbling with excitement.

“You did, Dad, but hold on a moment,” Pebbles tells Freddy. “There are a few things you need to think about before you talk to your new American friend.”

“I know, you told me before, I maybe old but I’m not senile. You said that I need to settle terms of the lease like: the size of the land; how long you want to lease the land for; responsibilities and maintenance required by the lessee; and of course how much you are going to rent the land out for. But I’ve got that all figured out. Like I said, five years and top dollar, I’ve got a Valuer coming by next week.”

“That’s great, but you also need to know the law about Overseas Investment Act”

“But I’m not investing overseas,” interrupted Freddy “I’m actually not investing at all.”

“Right, but the Overseas Investment Act governs the investments that people or companies from overseas can make in New Zealand, in order to protect our local interests. I do know that the law limits a lease to non-urban lands less than 5 hectares in size and also prohibits terms of three years or more,” clarified Pebbles.  “You should get some legal advice on the specifics.”

“Surely, it’ll be ‘right,” Freddy replied with a touch of exasperation. “What’s the worst that can happen Pebbles?”

“Dad, you need to get some advice. A property lawyer would be able to tell you, but there may be unanticipated legal consequences or issues that result. We’ve talked about this before: If you’re going to do something with land, you really need proper legal advice.”

“But if we all just play nice,” Freddy tried a new tact. “You know more like a gentleman’s agreement, we don’t have to really tell anyone he’s American do we?”

Taking her father’s hand, Pebbles replied, “These laws are in place for a reason, most of them have penalties such as fines or jail terms. Get some proper advice, Dad.”

The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document. 

If you would like more information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser. 

 

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