Each week, national law firm Simpson Grierson answers commercial property questions which can be emailed and headed "commercial property problems". This week's question is answered by senior associate Daniel Kelleher and law graduate Niven Prasad. They can be contacted at daniel.kelleher@simpsongrierson.com and niven.prasad@simpsongrierson.com
Q. While travelling in New Zealand, I stayed several nights at one tourist lodge. The owners have been trying to sell for some time and I am thinking of buying it and running the business. It is in a fantastic location with stunning views of a national park. The lodge
is small but there is plenty of land for development. I think the price the owners are asking is good but they mentioned something about needing "overseas consent" because this land is in a rural area - although I think it is quite close to a town. Is this correct?
A. We would need further information on the property to be conclusive. However, in general, if this property is "sensitive land" under the Overseas Investment Act 2005, then you will need to apply to the New Zealand Overseas Investment Office (OIO) for consent to buy it. You will need to satisfy a number of criteria including:
* The transaction will, or is likely to, benefit New Zealand, or alternatively,
* the relevant overseas person intends to reside in New Zealand indefinitely.
OIO consent is required if you are an overseas person, but not a New Zealand citizen or an ordinary resident in New Zealand, and if you are buying "sensitive land".
There are many different types of "sensitive land" but the most common types are:
* Non-urban land over five hectares.
* Land over 0.4 hectares that adjoins certain usual land such as a lake, a regional park, a reserve or a historic place. We will refer to this as "special land" in this article.
"Non-urban land" is defined as:
* Farm land.
* Any land other than land that is both in an urban area and used for commercial, industrial, or residential purposes.
Check the total area of the property and whether it adjoins any special land. If the property does not adjoin any special land and is less than five hectares, then OIO consent may not be required.
If the property is larger than five hectares, then this would depend on whether it is in an urban area or not. A property is not farm land if it is not "used exclusively or principally for agricultural, horticultural, or pastoral purposes, or for the keeping of bees, poultry, or livestock".
If the main use of the property is as a tourist accommodation, then it is used for commercial purposes.
Whether a property is considered to be in an urban area will depend on the location, size and character of the land. District plans and aerial photographs are considered the most effective tools in assessing this question.
As a guide, urban areas are characterised by high population density, small land holdings that are less than 0.4ha, and zoning that is compatible with high-density commercial, industrial and/or residential activity.
Non-urban areas are characterised by open space, paddocks, pastures or forests and large land holdings in excess of two hectares. The zoning may be compatible with agricultural, horticultural or viticultural activities.
You need to check the council zoning and what activities are permitted and also the details of neighbouring properties. Other indicators include whether the property has full services like sewerage, water, electricity; is close to schools, supermarkets, libraries or the town centre; the existence of public transport; mobile telephone coverage; and whether the neighbouring properties are small and not used for any type of farming.
Determining if consent is required and applying for consent requires significant legal and land expertise. We recommend you first look at the OIO website www.linz.govt.nz/overseas-investment/ as this provides useful information and guidelines.
We strongly recommend you consult a lawyer to ensure compliance and to make any offer conditional on obtaining OIO consent, if consent is required.
We understand that the act is being reviewed, but details of proposed changes are not yet known.
The information contained in Commercial Property is intended to provide general information in summary form current at the time of printing. The contents do not constitute legal advice and should not be relied on as such. Specialist advice should be sought in particular matters.
