New hurdles for overseas investment in farm land
Hot on the heels of the intended ban on overseas persons buying existing residential homes in New Zealand (with legislation expected before Christmas), the Government has now announced higher requirements for overseas persons intending to purchase rural land here, and has issued a new Ministerial directive letter to the Overseas Investment Office (OIO) regarding these requirements.
In the past, ownership of “large” areas of farm land (greater than 10 times the average farm size – based on type) by an overseas person (whether that land was obtained in one purchase or via multiple separate purchases), required the OIO to view certain specified economic benefits as being of ‘relatively high importance’ in determining whether the overseas person was able to demonstrate substantial and identifiable benefits to New Zealand. As from 15 December 2017, the OIO will be required to view a similar set of benefits as being of relatively high importance when considering all overseas acquisitions of rural land over 5 hectares in size (i.e. the application of this “higher threshold” will no longer be limited to “large” areas).
The Government has identified the factors that will generally be considered to be of high relative importance in relation to rural land:
- the creation of new job opportunities in New Zealand (or retention of existing New Zealand jobs that would/might otherwise be lost);
- the introduction of new technology or business skills into New Zealand;
- increased export receipts for New Zealand exporters;
- increased processing of New Zealand’s primary resources; and
- the extent to which New Zealanders will or are likely to oversee or participate in the overseas investment.
These new restrictions do not apply to land where the principal use is forestry. Applications for consent to the overseas acquisition of forestry land will be subject to existing requirements (although the Government has specified the factors that it will now generally consider to be of high relative importance when considering such applications – increased processing of New Zealand’s primary resources, and the advancement of a significant Government policy or strategy). In addition, the Government has indicated that where the overseas person intends to process in New Zealand, the Overseas Investment Office would be expected to impose conditions on that processing – including potentially a requirement to enter into a supply agreement with a local processor.
The directive letter also directs the OIO in relation to certain other matters, including:
- tightening the criteria to meet the test of ‘intention to reside in New Zealand indefinitely’ (pursuant to which such persons are not required to show that their investment in sensitive land is likely to benefit New Zealand);
- the approach in relation to the acquisition of ‘special land’ (ie foreshore, seabed, riverbed or lakebed); and
- the Government’s expectations regarding the operation of the OIO.
The new ‘regime’ will be applied to all applications from 15 December 2017, including those already being assessed by the OIO at that point (although applicants who have submitted their application before 15 December will be given a “fair opportunity to make additional submissions”).
Please contact one of our experts if you have any queries in relation to these changes, or any other aspect of the Overseas Investment Act process.