New Zealand: Buying and developing property

Doing Business in NZ
Last Updated: 3 August 2011
Article by Matthew Carroll and Mark Reese

"Haere mai" is Māori for welcome and New Zealand is one of the most open economies in the world. But there are rules and regulations that will apply, and we are familiar with them.

This "Doing Business in NZ" publication is designed to provide the prospective investor with an introductory guide to the New Zealand legal framework as it applies to business. The information provided was accurate at the time of publication, and will be updated regularly. But it should not be relied upon as a basis for making business decisions as circumstances, business conditions, government policy and interpretation of the law may change.

We recommend that you seek advice specific to your needs before making any decisions and will be happy to assist.

Title

New Zealand uses the Torrens land registration system under which most parcels of land have their own titles showing dimensions and location, and recording ownership and other interests affecting the land. The government guarantees the accuracy of titles, which can be searched by the public for a nominal fee.

Chapman Tripp provides a full title searching service.

The primary attraction of the Torrens system is that dealings can be conducted in reliance on a single title, rather than on a succession of title deeds. New Zealand has converted almost all titles, plans and instruments into an electronic format, allowing real-time searching and electronic registration of all land title and surveying transactions.

Under New Zealand law, buildings and other improvements permanently attached to the land form part of the land itself and pass with ownership of the land, unless the current owner and a purchaser agree otherwise.

Contracts for sale and purchase of land

To be enforceable under New Zealand law, a contract for the sale and purchase of land must be in writing and signed by the parties involved or their authorised agents.

Once signed, an agreement for sale and purchase becomes legally binding on all parties. It can, however, be made subject to conditions which protect the seller or buyer.

Common conditions are:

  • the buyer raising finance
  • the buyer being satisfied with valuation, local authority information relating to the land, engineering reports and building reports, and
  • the buyer being satisfied with the title.

Where a real estate agent is engaged by a seller to effect a sale, commission is payable by the seller, typically at a rate of 4% of the purchase price up to NZ$250,000 and 2% thereafter (plus GST). There is no stamp duty.

Dealings with land are registered electronically against the title.

Resource Management Act and district plans

The Resource Management Act 1991 (RMA) is New Zealand's principal statute relating to the use of land, water, minerals, the coast, air and physical resources. The Act aims to promote "sustainable management of physical and natural resources". The Act also seeks to maintain and enhance New Zealand's "clean, green" image.

The RMA has major implications for industrial projects and property developments. A new development may require a number of consents under the Act before it can go ahead.

Controls on development are administered by locally elected government authorities and are expressed through a range of publicly notified plans. These include regional plans, regional coastal plans and district plans. Plans set out rules for activities in various locations or 'zones". Parties seeking consent to proceed with a development must follow the procedures set out in the relevant plan, and this may involve public participation through the public notification of the consent application.

Privately owned land may be designated in the district plan as being required by the government for a public work, which may result in the land being acquired by the government (compulsorily if necessary). The current market value of the land would be paid as compensation.

Building works

The Building Act 2004 is designed to regulate and control building work and the use of buildings. Every new building and most substantial alterations or additions to existing buildings will require a building consent. Multiple-use approvals are available for group home builders who build homes throughout New Zealand using the same or similar plans.

On completion of works, a code compliance certificate will be issued, provided compliance with the building consent has been satisfied.

Allied to the Building Act is the Building Code. This sets criteria to ensure buildings are safe, sanitary, have adequate means of escape and, in the case of public buildings, have access and facilities for disabled persons. Existing buildings, which are being altered, may require upgrading in the course of the alterations in order to comply with these criteria as nearly as is reasonably practicable. Buildings considered earthquake prone may also be required to be upgraded.

The Act imposes restrictions upon occupation of a building where public areas of that building are subject to building works for which a code compliance certificate has not yet been issued.

Stratum estates

The Unit Titles Act 1972 allows titles to be issued for parts of buildings, for example an apartment or industrial park. The Act provides for a body corporate (comprising the unit owners) to be established, with a set of rules governing the use and maintenance of the building. The body corporate is tasked with insuring the building and controlling and maintaining the common areas. The unit owners pay a body corporate levy to cover its expenses. Before buying a unit, the body corporate secretary will issue a purchaser a certificate setting out the vendor's body corporate liabilities, which pass to the purchaser.

Barriers to buying land

In general, there are few restrictions on the purchase of land in New Zealand unless that land falls within one of the regulated categories under the Overseas Investment Act 2005. For a detailed discussion of the screening regime, refer to the chapter on Overseas investment regime. There are restrictions on the sale of land held by government agencies, which will need to be resolved before any sale to a private party (whether local or overseas) can proceed.

Māori land claims

Land claims by Maori, the indigenous people of New Zealand, are governed by the Treaty of Waitangi Act 1975. Under the Act, grievances are heard by the Waitangi Tribunal which can then make recommendations to the government regarding the resolution of those grievances.

Recommendations for the return of land to Maori are generally applicable only in respect to land owned by the Government or state-owned enterprises. Privately owned land is not subject to return to Maori ownership unless the title to the land has been specifically endorsed to that effect (and even then, current policy is not to exercise that right). If it was exercised, the current market value would be paid.

Minerals

Access to and rights to prospect, explore and mine New Zealand's extensive petroleum and mineral estate, including coal, are governed by the Crown Minerals Act 1991 and Minerals and Petroleum Programmes issued under it.

All petroleum, gold, silver and uranium existing in land (including under the sea) is the property of the Crown. No person may prospect or explore for, or mine, Crown-owned minerals without an appropriate permit.

The Minerals Programmes govern the policies and procedures applicable to the management of Crown-owned minerals, coal and petroleum. Their purpose is to promote the responsible discovery and development of resources that contribute substantially to our economy, consistent with the efficient allocation of permits, the Crown obtaining a fair financial return and having due regard to the principles of the Treaty of Waitangi. By and large, a permit will be awarded to the person most likely to effectively prospect, explore or develop the resource in accordance with the permit obligations and good practice.

Return to the Crown is assured through a royalty regime, although there is provision in the Act for the Crown also to participate in any given permit and thus derive a fair financial return through that avenue. The current policy is, however, not to exercise this right.

All transfers of or other dealings with a permit interest require the consent of Crown Minerals to be effective.

More information is available at: www.crownminerals.govt.nz

We make every effort to ensure the accuracy of the information provided but it should not be relied upon as a basis for making business decisions as circumstances, business conditions, government policy and interpretation of the law may change.

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.

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Authors
Matthew Carroll
 
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