New rules for land sales to overseas investors

New Zealand’s land is a valuable resource and essential to our long-term prosperity. The Overseas Investment Act 2005 sets strict rules around overseas investments in New Zealand’s land and residential real estate. This includes buying a home, farmland or land for development. The rules also cover leases of more than ten years of investing in a business that owns or controls sensitive land, like owning its premises.

Put simply, if an overseas person wants to buy or lease land, then some form of overseas investment approval will probably be required.

Rule changes for overseas people buying land in New Zealand came into force on 24 November 2021 and are the final stage of law changes in a programme that started in 2018. The latest changes include some important new rules for the sale of farmland to overseas buyers. Real estate agents active in the rural property sector need to be aware of these.

Advertising for farm sales

Before an overseas buyer can purchase New Zealand farmland, there is a requirement that the land is first advertised locally, so New Zealanders know it is for sale and have the opportunity to consider buying it. These rules are being strengthened and modernised.

The new rules mean farmland must be advertised online and in print for at least 30 days before an agreement with an overseas buyer can be entered into. An exemption in certain circumstances is available. More detail is available on the overseas investment pages of the Toitū Te Whenua (LINZ) website.

Changes for special land

Rules about what is currently known as ‘Special Land’ are also changing. The land types include marine and coastal areas, or the beds of rivers, streams or lakes. It is less common to see this sort of land included in a sale, but it is particularly sensitive under the Act.

The new rules clarify and strengthen requirements for the sale of this land. It will now be called ‘Fresh or Seawater Areas’ under the Overseas Investment Act. If an overseas investor is buying land or taking up a Crown pastoral lease, any Fresh or Seawater Areas must be first offered to the Crown. The Crown has the right to acquire these areas but may decide not to.

Timeliness for applicants

New assessment timeframes will apply to decisions on applications for overseas investment consent. These aim to speed up the process and give buyers and sellers more certainty.

Timeframes will vary depending on the type of application. They are expected to be challenging to meet and require significant improvements to timeliness. A phasing-in period is likely as the improvements take effect.

Overseas buyers who have a residence class visa and are committed to living in New Zealand can apply to buy one home in which to live. For these applications, the timeframe will be ten working days. The time increases to 30 working days if the land is also sensitive for another reason, such as a lifestyle block on rural-zoned land.

Other purchase approvals, for example, buying a farm, are more complex to assess and longer timeframes will apply.

Will New Zealand benefit?

The reforms will also change how many applications to buy sensitive land are assessed through the Benefit to New Zealand Test.

The new Benefit to New Zealand Test is designed to give a more certain approach to assessing the benefits of proposed investments. The changes are intended to streamline the assessment process and simplify applications.

The new test also includes a higher threshold for overseas investments in farmland, requiring potential overseas buyers to show that their investment will bring substantial benefits in particular areas.

Assessing overseas investments

Toitū Te Whenua’s Overseas Investment team receives and assesses applications from overseas investors. They also support the Ministers who make decisions on applications and make some decisions under authority delegated by the Ministers.

The changes to the Overseas Investment Act are designed to streamline requirements for investors. This includes focusing screening and assessment on investments that present more risk, to help ensure our country’s valuable lands, significant business assets and fishing quota are protected for the benefit of all New Zealanders.

Anneke Turton

Reform Programme Manager, Toitū Te Whenua Overseas Investment