Officials probe foreign land sales

Land sales to foreigners are being investigated for potentially bypassing the Government watchdog.

New Zealand’s overseas investment rules mean sales of sensitive land must be approved by the Overseas Investment Office (OIO), which is an arm of government department Land Information New Zealand (LINZ).

LINZ spokeswoman Joanna Carr confirms: “We are currently investigating a number of matters including where overseas people appear to have needed Overseas Investment Act consent, but did not apply to the OIO.”

Newsroom asked how many sales are being investigated and where they are. But Carr says: “We cannot provide any further detail at this time as it could jeopardise our investigations.”

The OIO has the power to force foreigners to sell land if it's been bought without proper consent.

Forest & Bird Canterbury/West Coast regional manager Jen Miller, of Christchurch, says it’s of concern if sales have bypassed the OIO, which can mandate protection for high conservation values and provide public access.

“It is the only way, really, in which New Zealanders have some say over how foreign ownership occurs in our country, especially for very special and important places, like high country stations.”

She adds: “If it is the case that there are a number of purchases being made without being vetted by the OIO, that would suggest that there’s some significant problem with the way that system’s working and it would be important for this government to have a really good look at what’s going on.”

Federated Mountain Clubs president Peter Wilson, of Wellington, goes further, accusing the OIO of being a paper tiger “and sorely in need of reform”.

For years, Christchurch-based Campaign Against Foreign Control of Aotearoa (CAFCA) has panned the OIO as a rubber-stamping organisation that approves almost all applications.

CAFCA founder Murray Horton, who has been tracking foreign ownership in New Zealand for more than 40 years, says the OIO sees its job as facilitating overseas investment so LINZ’s investigation is a welcome development.

“We, CAFCA, have continually said that we want to see a body that acts more like a bouncer than a doorman, to put it in Christchurch pub terms.”

(The OIO does occasionally hand out sanctions. Earlier this year, the OIO formally warned Queenstown lawyer Russell Mawhinney for giving incorrect advice to foreign investors about land sales. His clients, Americans Paul and Debbi Brainerd, had their purchase of the Glenorchy campground, near Queenstown, retrospectively approved but they had to pay a penalty.)

'Operational' matter

Newsroom asked Land Information Minister Eugenie Sage for comment, but her office says the issue is “operational” and we should direct our questions to LINZ.

There are several reasons a foreigner might want to avoid the OIO. Cost is one. Queenstown lawyer Graeme Todd, who has dealt with several high-profile land sales to foreigners, says the process normally costs at least $100,000, including an average of $45,000 to the OIO. He confirms unconditional agreements can be over-ridden by the OIO approval process.

Lincoln University environmental management senior lecturer Ann Brower says a sale would go through more quickly if the OIO wasn’t involved. She adds: “Failing to enforce rules on overseas buyers will no doubt facilitate the sale of sensitive land to overseas interests.”

Land sales to foreigners have been a political football for years. Remember 2008, when a down-in-the-polls Helen Clark took a walk near Arrowtown with Shania Twain? Or when John Key worried New Zealanders would become tenants in their own country when the so-called Crafar dairy farms were being sold?

The issue also featured in this year’s election campaign, particularly in relation to the housing market. Earlier this month, the Government said it would tighten rules for foreigners who wanted to buy farmland. And last week, Prime Minister Jacinda Ardern confirmed the sale of several big parcels of land in the South Island were on hold while the Government reviews the Overseas Investment Act.

Last year, the OIO approved the sale of 362,132 hectares of freehold rural land and 103,731 hectares of leases and other interests in land to foreigners, according to CAFCA figures. (Of that, 337,000 hectares of freehold land and 89,000 hectares of leases and other interests were sold from one foreign investor to another.)

The annual average in the previous decade, by CAFCA's count, was 131,062 hectares of freehold land and 51,177 of leases and other interests. Horton says the danger of foreign ownership includes alienating land from New Zealanders, the profits and enterprises of the land leaving the country, and, in the case of foreigners buying luxury houses, driving up property prices.

Complex and technical

Queenstown lawyer Todd says the Overseas Investment Act is complex and technical. Sure, if an overseas person is buying a very large farm it’ll be obvious OIO approval is needed, but that’s not always the case.

A block of land might be under the threshold of the area that would normally trigger the need for Overseas Investment Act approval, but the title might have a share in an undivided access lot of a sufficient size to breach the threshold.

“Or, for example, the access lot might adjoin a reserve or a lakefront or a river. And that’s the type of thing that normally trips up people, because they don’t take into consideration the rights that go with the land they’re purchasing.”

Some thresholds that trigger OIO involvement are: farm land that exceeds five hectares, land bigger than 4000 square metres that adjoins certain types of reserve or conservation areas or land bigger than 2000 square metres that adjoins foreshore.

Todd’s personal view is that an overseas person buying land might provide greater benefits to New Zealand, such as public access.

He refers to one of the more controversial sales he was involved in – Hunter Valley Station, near Wanaka, the pastoral lease for which was bought by American TV presenter Matt Lauer and his wife Annette.

The Lauers agreed to conditional access along the farm track to Hawea Conservation Park and promised to spend $1.6 million developing the farm and increasing stock numbers.

Todd: “There’s no means by which those conditions could have been imposed on a New Zealander. Generally, if you’re not going to get benefits then the person’s not going to get consent.”

(CAFCA's Horton says the devil’s in the detail when it comes to benefits. “In terms of money coming in, each case needs to be examined on its merits – quite often you’ll find that there’s actually a good amount of money flowing out.”)

Part of the OIO’s mandate is to protect New Zealand’s sensitive land. Applicants have to prove the benefits to the country of their investment. But critics like Federated Mountain Clubs’ Wilson say the OIO is poorly performed and slow to admit its mistakes.

Wilson says he hasn’t heard of any drastic changes to access through rural properties, which might be a pointer to properties LINZ might be investigating.

“But we’d still be really concerned if the Overseas Investment Office doesn’t have proper monitoring provisions in place.”

What’s his level of confidence that the OIO would take enforcement action if foreign owners were to have bypassed its process? “Not high.”

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