Earlier this year, we discussed the Government's changes allowing eligible Active Investor Plus (AIP), Investor 1 and Investor 2 visa holders to purchase residential property in New Zealand worth more than $5 million.

Land Information New Zealand (LINZ) has now released further guidance on how the new rules will apply in practice. The guidance provides clarification on a number of key issues, including the $5 million threshold, consent requirements, ownership structures and property eligibility.

What Counts Toward the $5 Million Threshold?

LINZ has confirmed that the $5 million threshold only includes the value of the land and fixtures (including GST).

Importantly, chattels such as furniture, artwork, vehicles, appliances and other personal property do not count towards the threshold. LINZ has also made it clear that parties cannot artificially increase a property's value by including additional assets or side arrangements.

For investors purchasing land and building a home, construction costs can be included. This may include site works, retaining walls, driveways, landscaping and professional fees.

However, renovation costs on an existing home do not count. If the purchase price is below $5 million, the investor will generally need to build a new dwelling and ensure the combined land and build costs exceed $5 million.

Consent is Still Required

OIO consent remains mandatory and LINZ has confirmed that:

• Consent is required before residential land is acquired.
• Applications are property-specific.
• There is no pre-approval or standing consent process.
• Applications will generally be processed within approximately five working days.

Investors can enter into a sale and purchase agreement before obtaining consent, but must ensure that the agreement is conditional on OIO approval. LINZ recommends setting the condition timeframe to at least approximately 20 working days.

Auctions Require Care

One practical issue that is frequently queried by prospective investors relates to auctions. Because consent cannot be granted until there is an agreed purchase price, investors cannot simply bid unconditionally at auction and seek retroactive consent.

Instead any auction bid will generally need to be conditional on OIO consent, which will usually require direct negotiations and signing of a pre-auction variation with the vendor and their agent before the auction that the vendor accepts the purchaser's bid will be conditional on OIO consent.

Building a New Home

LINZ has adopted a relatively practical approach for build projects. Detailed plans and contracts will not usually be required at the application stage. However, consent will be subject to monitoring by the OIO and typically include conditions requiring:

• A new dwelling to be completed;
• Combined land and build costs to exceed $5 million;
• Reporting to LINZ on progress and costs; and
• Completion within three years, unless an extension is approved.

Failure to comply with these conditions could result in enforcement action, including a requirement to sell the property.

Not Every Property Qualifies

The new pathway only applies to residential land that is not sensitive for another reason. Some properties remain excluded, including:

• Rural land larger than 5 hectares;
• Certain waterfront and foreshore properties;
• Some island properties, including larger properties on Waiheke Island and Great Barrier Island; and
• Other categories of sensitive land.

As a result, some high-value lifestyle, coastal and island properties may still be unavailable despite exceeding the $5 million threshold.

Companies and Trusts Can Be Used

LINZ has also confirmed that purchases can be made through companies and trusts.

For companies: the investor visa holder (alone or together with their spouse or partner) must retain more than 25% ownership or control, and other overseas ownership is restricted.

For trusts: only the investor and their immediate family can generally benefit from the trust, and control must remain with approved individuals.

These requirements can be technical and investors should obtain advice before settling on a structure.

One Property Per Investor Visa Holder

One important clarification that prospective investors should keep in mind relates to the one-property limitation. A qualifying investor visa holder can generally only own one property under this pathway at a time and before acquiring a new property whilst using the same visa, they must first sell the existing property.

However, the restriction applies to each qualifying visa holder individually. Where both spouses or partners hold their own qualifying investor visas, each may separately rely on their visa to acquire a qualifying property. Where a couple or family have one principal applicant, then they can only buy one qualifying property.

This means the regime is not necessarily limited to one property per family, but care is required.

How Can the Property Be Used?

Once purchased, the use of the property is relatively flexible and LINZ has clarified that it may be used as:

• A family home;
• A holiday home; or
• For business purposes.

However, it is important to note that the property itself does not count as an acceptable investment for investor visa purposes.

Final Thoughts

The latest LINZ guidance provides useful clarity around how the new investor visa property pathway will operate in practice.

While the process appears relatively straightforward, investors should not assume that every high-value property will qualify. Property type, location, ownership structure and transaction process all remain important considerations.

For eligible investor visa holders, however, the guidance provides a clearer pathway to acquiring residential property in New Zealand and greater certainty around how applications will be assessed.

Speak to our expert team here at Queen City Law if you would like further guidance. For more information about this article, you can contact Tina and Joseph. For more information about AIP Golden Visas, you can click here, or you can contact Marcus, Bradley or Tom by clicking the links.

Disclaimer:

This article is general information only and does not constitute legal advice. Every dispute is different and professional advice should be obtained before taking action.