By Lee Harris - 22 Feb 2022
The Overseas Investment Act (
OIA) modifications removed the ability for
most foreigners to own New Zealand residential land. The changes
impact any interest in residential land acquired from 22 October
2018 onwards. Although there are a few exemptions from the new
restrictions, they are limited. Several years later and
we still see misunderstanding about the OIA
restrictions.
An example of this is foreign owners of hotel pool apartments
who think they will be able to use the apartment however they wish
once the hotel lease finishes.
Essentially, whatever rights were as held on 22 October 2018,
those rights cannot be subsequently modified so that the owner
effectively gains additional rights that were prohibited as from 22
October 2018.
Therefore, if a non-complying foreigner acquired their rights in
the hotel pool apartment after 21 October 2018, the rights they
acquired do not give them the right to automatically change the use
of the apartment to a residential use. The prohibition on
residential use means that the hotel pool apartment cannot
be used as long term accommodation while the non-complying
foreigner owns it.
This is because, starting from 22 October 2018, the OIA
introduced new restrictions in respect of people who are permitted
to own New Zealand residential land. Residential land can
only be owned by New Zealand, Australian or Singaporean citizens,
or, in certain circumstances, by New Zealand residents or
Australian and Singaporean permanent residents.
An apartment forming part of a hotel is commercial by
nature. This means that any non-complying foreigner who
acquired such an apartment from 22 October 2018 only acquired a
commercial interest in the apartment. A non-complying foreign
owner is not permitted as of right to subsequently convert the
commercial nature of the apartment to a residential nature, as 21
October 2018 was the last date that they could acquire an interest
in residential land.
In certain circumstances, there could be opportunities to either
seek exemptions or consents for a conversion of the hotel unit to
residential use. However, there is no guarantee consent would be
given and the costs would be high. Further, even if consent is
granted, it can be presumed that there would be a condition that
non-complying foreign owners would still need to sell the apartment
immediately after the conversion.
Another example is that long term rental of residential
properties is also subject to the OIA restrictions. This means that
non-qualifying foreigners are no longer permitted to have long term
lease arrangement for residential land.
If you or your clients would like specific advice regarding OIA
rights, Martelli McKegg would be delighted to assist. We represent
a number of hotel pools and have extensive experience working with
the Overseas Investment Office.
Contacts
Steven
Lee
Lee
Harris