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.