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Overseas buyer ordered to sell sensitive land

By Steven Lee and Genelle Seah - 29 Jul 2019

Perhaps too little attention is paid by overseas buyers to the Overseas Investment Act ( Act). A matter of poor due diligence or sheer ignorance could cost hundreds of thousands, if not more.

A recent High Court case in which an overseas property developer was ordered to pay the maximum penalty and divest its entire interest in the land it purchased serves as a warning to overseas buyers not to overlook or turn a blind eye to the requirement to seek the consent of the Overseas Investment Office (OIO) in buying certain types of land in New Zealand.

In 2013, this particular overseas property developer, BCH Investments Limited (BCH) acquired five hectares of land at 79-95 Gills Road, Albany (Land) for $12.95 million without the consent of the OIO. The Land is next to a scenic reserve, which means that it is sensitive land under the Act. BCH had planned to develop the Land into 117 residential lots for sale (Subdivision).

In 2014, it came to the OIO's attention that BCH had not complied with the Act. However, BCH had already commenced Subdivision works. To protect the interests of the contractors and buyers of the subdivided lots, BCH was required to complete the Subdivision in an orderly manner.

The High Court ordered that BCH pay $588,000, comprising the maximum civil penalty of $300,000 and costs of $288,000. Furthermore, BCH was to divest its entire interest in the Land within two years. Although BCH will not make any profit from the Subdivision, the High Court considered that the maximum penalty was appropriate because BCH had purchased the Land for the purpose of significant commercial gain.

The Court emphasised that BCH should have undertaken explicit enquiries as to its obligations under the Act given the size, scope and nature of the development proposed and warned that the penalty would have been significantly higher had BCH made a quantifiable gain on the acquisition and development of the properties.

This case shows that the OIO is committed to its role in protecting sensitive land in New Zealand and will continue to pursue cases where land has been acquired without the requisite consent. It is important therefore to seek the right advice from a suitably qualified lawyer when buying land in New Zealand. Martelli McKegg has a specialist team of lawyers who are experienced in the area of overseas investment. If you require any assistance or clarification regarding the requirements under the Overseas Investment Act 2005, contact Melissa Clark, Steven Lee or Genelle Seah.


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