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Overseas Investment Act - restrictions affecting non-complying foreigners

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.


Steven Lee

Lee Harris


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