A consultation paper has just been released by the Financial Markets Authority (FMA) which will affect all real estate developers, property investors, real estate agents, and others involved in property developments with communal facilities.

At present, residential property developments with communal facilities held in a corporate vehicle generally have to comply with an exemption issued under the existing Securities Act (Real Property Developments) Exemption Notice 2007 if they do not want to go through the process of issuing a prospectus. The FMA is proposing to make things easier for making offers of real estate in these types of developments.

The FMA's view is that these types of structures should not be regulated under financial markets law. They have asked for feedback on whether corporate vehicles set up by property developers to manage the costs associated with communal facilities in real property (such as access ways, lifts, or common garden areas), should fall under the financial markets regime.

This treatment will greatly reduce the number of obligations on developers for these arrangements and lower compliance costs. However, as always, the devil is in the detail. To qualify for this treatment, a facility-owning company must have certain characteristics, and the consultation paper issued by the FMA has specific questions on this proposed designation and exemption.

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