The rules for investing into rural land and forest land have been tightened, and further changes to legislation are expected in the new year.
The New Zealand Government has tightened its overseas investment regime by directing the Overseas Investment Office (OIO) to place higher relative importance on economic factors, and ensuring oversight and participation by New Zealanders, when assessing applications involving rural land.
See here for the full Ministerial Directive Letter.
The new approach takes effect on 15 December and will apply to all new and existing applications. It reflects a desire to achieve a balance between the need for highly beneficial overseas investment and the need for New Zealand to maintain ownership and control of sensitive New Zealand assets.
The key points are:
- The Government believes that the merits of overseas investment in the primary sector can be less compelling, given that we are already world leaders in this area. The Government is therefore concerned to ensure that overseas investments in rural land are "genuinely substantial and identifiable". We read this as raising the threshold for consent for rural land acquisitions.
- The factors the Government considers to be of high relative importance when assessing investments in rural land are primarily economic in nature, with an increased focus on ensuring oversight and participation by New Zealanders. These factors include:
- new technology or business skills
- increased export receipts
- increased processing of primary products, and
- oversight and participation by New Zealanders.
- The directive as it relates to "rural land" applies to all non-urban land over five hectares other than forestry land (discussed below).
- Investors into the primary sector can expect greater scrutiny on the economic benefits of the investment, and targeted conditions of consent to ensure that those benefits are delivered.
- The letter introduces a new focus on "forest land" – land over five hectares, the existing principal use of which is forestry – and explains the Government's wish to encourage an increase in value-added processing.
- The letter directs the OIO to place special emphasis on whether investment in forest land will lead to increased processing of primary products in New Zealand, and the advancement of the Government's forestry-related strategies.
- Where an investment plan includes local processing, it is expected that specific conditions of consent will be imposed to ensure this, such as requiring entry into supply arrangements with local processors.
- Although the letter highlights the importance of environmental sustainability, and expressly notes the importance of a balance between economic, environmental, social and cultural goals, the letter notably does not require the OIO to place any special emphasis on the environmental factors in the Overseas Investment Act. That said, given one of the consenting Ministers is a Green MP, we anticipate that focusing on the environment in investment plans will be influential in securing consent.
- Finally, the Government has heeded complaints about the timeliness and resourcing of the OIO, and has directed it to improve its performance. The letter instructs the OIO to perform its functions in a timely, consistent and efficient manner, and to develop and maintain systems to apprise applicants of progress in assessing applications.
The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.