Are you an apartment developer wanting to explore selling to overseas persons? If so, read on...
Queenstown is experiencing a surge in the construction of apartment complexes being built in Central Queenstown, Frankton and Five Mile. These apartments are aimed at first time buyers, workers and young families. Although this seems to be good news for the housing crisis, developers have found the restrictions placed on overseas buyers from the Overseas Investment Office (OIO) has negatively impacted the number of apartment sales, reducing the number of potential long term rentals.
What is the Large Apartment Development Exemption Certificate?
The Large Apartment Development Exemption Certificate (Exemption) aims to address this issue. This Exemption enables a portion of apartments within a development to be sold to overseas persons, who would normally be restricted from buying property in New Zealand provided the developer can satisfy the criteria below.
Developers can apply to the OIO for the Exemption which permits 60% of the apartments within a development to be sold to overseas purchasers, without the need for those purchasers to obtain prior OIO consent.
What criteria must the development meet in order to apply for the Exemption?
The development must include the construction one or more multi-storey buildings containing at least 20 residential dwellings.
The exemption must be applied for before the development is complete. If granted, the overseas purchasers cannot live in the apartment themselves, however it can be used as an investment property. There is no obligation for the apartment to be immediately on sold.
How is the application for Exemption assessed?
In considering whether to grant the Exemption, the Minister will assess several factors. These factors include:
Whether the developer has the appropriate resource consents and building consents;
The financial strength of the developer;
Whether the developer or its associates has previous experience in land development; and
The history of the developer or its associate’s compliance with consent conditions.
This is a discretionary test. The factors listed above are persuasive, but not decisive. If the Exemption is granted, conditions and restrictions may be imposed, such as:
Enabling the OIO to identify and monitor the apartments purchased by foreign buyers;
Ensuring foreign buyers do not live in the apartments; and
Enabling the OIO to monitor ongoing compliance to ensure foreign buyers do not live in the apartments.
What does the application entail?
The application fee for the Exemption is $34,100.00. Information required for the application includes:
Details about the development;
Details about the developer and its experience;
The developer’s financial information;
Information about the developer’s previous OIO involvement;
Information about the consents and permits required for the development;
Details of the land sensitivity status; and
The above comments are general in nature and are not to be treated as specific advice. Every large apartment development circumstances will be different, so if in doubt, please call one of our Really Very Good OIO exemption experts at RVG Law for advice.
This article has been prepared by RVG Law's "junior rock star grad" Bridgette Hamilton