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Rules for selling rural property to overseas buyers

By Eleanor Jackson, Solicitor

First published in The Rural News 21 July 2009

Are you thinking about selling your farm? If so you should be aware that if you receive an offer from someone overseas, there are certain advertising requirements you will probably need to meet. Getting the advertising right now could save you time and money later.

The Overseas Investment Act 2005 and the Overseas Investment Regulations 2005  place requirements on the sale of sensitive New Zealand land or assets to ‘overseas persons’.  The onus for most of these is on the overseas buyer. However, if you are selling sensitive land, which includes farm land, to an overseas buyer you must satisfy certain advertising requirements to comply with the legislation and regulations.

What does this mean?  “Sensitive land” includes all non-urban land exceeding five hectares. “Farmland” means land used principally for agriculture, horticulture or pastoral purposes, or for bee keeping, poultry or livestock (it does not include land used for forestry).  As for “overseas persons”, they are not just those without New Zealand residency or citizenship, but include entities where at least 25% control is held by overseas persons.  For example, a New Zealand registered company with at least 25% foreign control will be an overseas person under the Act.  So if you are selling your farm to an overseas person, odds are you will need to comply.

What are the advertising requirements?  Firstly, the farmland must be available for acquisition on the open market for at least 20 working days (and sometimes longer).  Secondly, the advertisement must contain a general description of the farmland, a statement that it is available for acquisition and that offers are sought, and the contact details of the owner.  Thirdly, the advertisement must be published in one of the five ways set out in the regulations.  Finally, the advertisement must have been published no longer than 12 months before the application for Overseas Investment Office consent.

The following rules apply to different forms of advertisements:

• Internet: of usual prominence on a site used for advertising land for 20 working days;
• Newspaper: of usual prominence in the property section of one edition;
• Notice or sign: of usual prominence in the real estate agent’s office for 20 working days;
• Placard: displayed on the relevant land for 20 working days in a manner that attracts the attention of potential purchasers; and
• Real estate sales publication: of usual prominence in one edition.

While there is no obligation to use more than one form of advertising, the Overseas Investment Office has said there may be circumstances when an applicant cannot establish that the land was genuinely available for acquisition if only one form of advertising was used.

What happens if these requirements are not met?  The advertising requirements must be complied with before the Overseas Investment Office will grant consent under the Act.  So, if you have entered a sale agreement with an overseas person before advertising the land, you will need to do at least two things. 

• Advertise the land for 20 working days before the Overseas Investment Office will consider an application from the buyer.  This will slow down what is already a long consent process. 
• The Overseas Investment Office will require you to enter a written variation to the sale agreement with the buyer to allow you to terminate should you receive an equal or better offer from a non-overseas person. 

If advertising can be done in accordance with the requirements at the outset, it will avoid the need for further advertising later, saving you time and money.

Eleanor Jackson is a specialist commercial solicitor at national and trans-Tasman law firm Duncan Cotterill. eleanor.jackson@DuncanCotterill.com