Are you an overseas investor interested in buying real estate in New Zealand? If so, are you aware of the restrictions on sensitive land ownership? 

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New Zealand real estate is popular amongst overseas investors, but its sensitive land regulations can make the buying process complex for overseas investors.

In this article, we will walk through the 3 categories of sensitive land and discuss the consent process required for overseas persons acquiring real estate in New Zealand.

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Who Needs Consent to Buy?

Under the Overseas Investment Act, certain types of transactions require consent from the Overseas Investment Office before an overseas person can acquire an interest in New Zealand real estate. 

An ‘interest’ in real estate can refer to acquiring a freehold estate, lease, or any other interest that lasts for a term of three years or more, including rights of renewal.

It also includes scenarios where shares are acquired in a company that owns or controls sensitive land, resulting in 25% ownership or control by an overseas person.

But before we go through how to obtain consent, it’s important to understand what sensitive land is and when consent is required to acquire it.

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What is Sensitive Land? 

Sensitive land can be broken down into 3 categories:

1. Sensitive land can be any land that has a property classification by the local council on the District Valuation Roll as ‘residential’ or ‘lifestyle’; 

2. Sensitive land can depend on the size or type of land; or

3. Sensitive land can depend on the proximity to other sensitive areas. 

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Unfortunately, there will be no bright yellow sign to warn prospective buyers of the existence of sensitive land. 

Before purchasing real estate in New Zealand, it is important to have a real estate attorney or lawyer carry out due diligence on the property to determine whether the land is sensitive land. 

Once a lawyer has determined that the land is sensitive land, they can then help you with the consent process. 

At NZ Legal, we routinely carry out real estate due diligence for overseas investors and provide assistance in navigating the legal and regulatory requirements of buying real estate in New Zealand.

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1. Residential Land

The first category of sensitive land is residential land or land that has a property category on the District Valuation Roll as ‘residential’ or ‘lifestyle. 

It encompasses land that is primarily used for residential purposes, including apartments, houses, and other residential properties and does not have any minimum size threshold to be considered sensitive land. 

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2. Sensitive Land Given its Size and Type

The second category of sensitive land is land that is sensitive given its size and type.

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Non-Urban Land

Non-urban land encompasses land that is not primarily used for residential or commercial purposes, such as rural land and farmland and is considered sensitive if it exceeds 5 hectares. 

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Land on Islands

Land on these islands is considered sensitive and subject to restrictions if it is larger than 0.4 hectares. 

While most other islands are considered sensitive regardless of size or location. It's worth noting that additional regulations or restrictions may apply due to their environmental or cultural significance.

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Marine and Coastal Areas

Marine and coastal areas are another category of land that are considered sensitive in New Zealand. These areas include the intertidal zone, the seabed, and the water column. 

There is no minimum size threshold for marine and coastal areas to be considered sensitive, as even small changes to these areas can have significant ecological impacts. 

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Lake Beds

Land that is the bed of a lake is also considered sensitive in New Zealand, and any area larger than 0.4 hectares is subject to restrictions. 

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Land Held for Conservation

To protect New Zealand’s unique biodiversity, significant areas of land are held for conservation purposes under the Conservation Act 1987. Land that is held for conservation purposes and is larger than 0.4 hectares is considered sensitive and subject to restrictions. 

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Land to be Used for Recreation

Land that is designated for recreational purposes is also considered sensitive and subject to restrictions if it is larger than 0.4 hectares. This includes land that is set aside for public parks, reserves, and open spaces. 

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Historic Land

Land that is subject to a heritage order or is designated as a historic place or area is considered sensitive and subject to restrictions if it is larger than 0.4 hectares. This includes places of cultural significance to Māori and areas of historical importance to New Zealand's colonial history. 

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3. Sensitive Land Next to Other Sensitive Areas

Finally, sensitive land can also be determined by the location of the property. The land under this category becomes sensitive because of what it is next to and includes land that is next to:

1. marine and coastal areas larger than 0.2 hectares; 

2. lake beds larger than 0.4 hectares;

3. land held for conservation purposes under the Conservation Act 1987 that are greater than 0.4 hectares;

4. national parks held under the National Parks Act 1980 exceeding 0.4 hectares;

5. land subject to a heritage order or a requirement for a heritage order under the Resource Management Act 1991 or the Heritage New Zealand Pouhere Taonga Act 2014 with an area greater than 0.4 hectares;

6. land exceeding 0.4 hectares that includes a wahi tapu or wahi tapu area that is entered on the New Zealand Heritage List/Rārangi Kōrero; and

7. land over 0.4 hectares that is set apart as Māori reservation and is wahi tapu under section 338 of Te Ture Whenua Māori Act 1993.

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Consent Process for Buying Real Estate in New Zealand

The consent process starts with an application being submitted to the Overseas Investment Office for residential or sensitive land consent. 

The Overseas Investment Office will assess the application and determine whether the transaction meets the benefit to New Zealand test and the investor test. 

The benefit to New Zealand test is largely discretionary and involves an assessment of whether the purchase will bring a net benefit to New Zealand. Some factors the Overseas Investment Office may consider as part of the test include: 

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1. will there be an economic benefit to New Zealand; 

2. will historical sites be protected and accessible; 

3. will there be a benefit to New Zealand’s natural environment; and 

4. will the investment assist government policy. 

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In addition, the investor test sets out the types of behaviours the Overseas Investment Office considers likely to pose a risk to New Zealand and questions the character and capabilities of the buyer.

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Key Takeaways

We highly recommend that you seek legal advice before entering into a property purchase agreement for real estate in New Zealand.

Entering into a property purchase agreement for sensitive land in New Zealand without consent can cost you up to $300,000NZD in fines. 

Therefore, it’s crucial to understand the 3 categories of sensitive land where consent is required and how the consent process works. 

At NZ Legal, we routinely carry out real estate due diligence for overseas investors and provide assistance in navigating the legal and regulatory requirements of buying real estate in New Zealand.

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