Lawyers fear $20,000 fines for failing to give information on foreign investors' citizenship status and say they would be forced into an impossible position by the Government's planned foreign house-buyer ban.

A strongly-worded 23-page Auckland District Law Society submission has gone to the Finance and Expenditure Select Committee, objecting to putting the onus on lawyers and conveyancers for checking the citizenship status of trusts, companies and people if the new law is passed.

"How are lawyers and conveyancing practitioners going to satisfy themselves that their clients are compliant with this legislation?" asked the submission from society president Joanna Pidgeon, who also complained of a lack of consultation with lawyers before the bill was drafted.

"Will it be enough to sight a certificate of citizenship or permanent residence visa or a passport or will they need to verify this?" she asked.

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The Treasury said it would be straightforward to check an individual's status but the status of companies and trusts might require substantial investigation to comply with the proposed Overseas Investment Amendment Act, Pidgeon said.

Lawyers or conveyancers could not independently check on the status and it was inappropriate for them to be able to certify that applications complied, she said.

"The reality is that the bill is asking conveyancers to certify beyond their capability and accordingly the society strongly objects to the inclusion of such a requirement," Pidgeon's submission said.

She cited a potential $20,000 fine for a lawyer or conveyancer who failed to provide the certification needed, saying it was unfair.

Joanna Pidgeon, president of the Auckland District Law Society.
Joanna Pidgeon, president of the Auckland District Law Society.

"The addition of a fine of up to $20,000 for failing to provide that certification in circumstances where the lawyer or conveyancer has not feasible ability to check the purchaser has been resident in the country for the immediately preceding 12 months and been present for the last 183 days is both an unfair and unrealistic requirement of the profession," she said.

"There would also likely be repercussions on a lawyer's practicing certificate if such an offence was committed."

David Parker, Associate Finance Minister, said his bill amended the Overseas Investment Act 2005 to ensure investments made by overseas people here would have genuine benefits for this country.

"This law recognises and reaffirms that it is not a right for an overseas buyer to purchase a house here," Parker said after the bill had its first reading.

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"Our objective is to ensure that the New Zealand housing market is shaped by New Zealanders."

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The change is achieved by bringing residential land within the category of sensitive land in the Overseas Investment Act. Only New Zealand and Australian citizens and permanent residents of both countries would be able to buy an existing home here without going through screening from the Overseas Investment Office.

The Government continues to welcome foreign investment that brings benefits to New Zealand, including our businesses and communities.