The Overseas Investment Amendment Regulations (No 2) 2001 and the
Overseas Investment Exemption Notice 2001 came into force on 1 February.
Changes to the Overseas Investment Act 1973 have also resulted.
The principal change is a requirement that all farmland first be offered
for sale on the open market to New Zealanders.
Farmland is defined as being 'land used exclusively or principally for
agricultural, horticultural or pastoral purposes or for the keeping of
bees, poultry or livestock'.
The regulations prescribe that before farmland or farmland securities
can be approved for sale to an overseas person, an owner must
demonstrate that the land or securities has been advertised to New Zealanders.
Advertisements must contain: A general description of the relevant land; A statement to the effect that the land or securities that are for
sale or acquisition, that offers are sought from potential purchasers,
and the contact details of the owner or other person to whom offers can be made;Advertisements must be: in a medium that is generally used for the advertising of sales of land; available to persons in the district in which the land is located; and made in a manner that is reasonably likely to be brought to the
attention of persons in that district who are seeking to acquire farmland.The following minimum requirements satisfy the advertising to the market - In newspapers - one edition in the property section of such newspapers where usual prominence is given; Signage of usual prominence in the Real Estate Agent's office for 20
days of usual prominence of relevant land for 20 working days; On the internet of usual prominence in the Real Estate Agent's
internet site for 20 working days.For a sale or acquisition by an overseas person to be approved land or
securities must have been available for sale or acquisition for at least
20 working days after the first advertisement was placed. However, an
owner may accept offers before the expiry of this period from a person
who is not an overseas person.
Importantly nothing in the regulations prevents the owner from selling
farmland to an overseas person but the advertising procedure must be
completed before a farmland owner can sell his or her property to an
overseas person.
There is no requirement to advertise at any particular price nor is
there a requirement to accept offers above any particular price or
within a price range which ordinarily is present in contractual rights
of first refusal or pre-exemption provisions.
It must be doubtful that the legislation change of requiring advertising
to the local market as a compulsory first step is likely to have the
desired effect of avoiding or reducing the sales of farmland to overseas
persons. However a higher threshold test for sales to overseas persons
is now a feature where the appropriate Ministers must decide if sales of
farmland are in the national interest and must determine that a sale
will likely result in substantial and identifiable benefits to New
Zealand or the local region.
There are a number of exemptions from the need to advertise which
arguably further dilutes the impact of preventing sales to overseas persons.
Exemptions include the following: Acquisition of farmland securities that are quoted in the New Zealand Stock Exchange; Acquisition of farmland securities where an investment statement or
registered prospectus is required under the Securities Act 1978; Acquisition of farmland or farmland securities from family members; Acquisition of members of the same overseas group;In addition, the schedule of portfolio investors who are exempt has been
updated in the new Exemption Notice 2001.
Finally practitioners need to be aware that the threshold of sites
adjoining foreshore is reduced from 4000 square metres to 2000 square
metres plus capturing more holiday type sales to overseas persons.
Author: John Greenwood
Partner,
Chapman Tripp Sheffield Youngand
Deputy Chairman - Property Law Section of the
Wellington District Law Society