Most laws tend to have initial bedding-in challenges. In the case of the new foreign buyer legislation, it’s the failure by would-be buyers to complete a crucial new form – an oversight so significant, it’s already derailing sales and causing financial grief.
Under the new overseas investment legislation, which came into force in October, all buyers of residential land must now sign a “Residential Land Statement”, certifying they are not an offshore person and can, therefore, legally buy land in New Zealand without having to obtain Overseas Investment Office consent. This form is available from your lawyer or real estate agent, and can also be downloaded here.
Although the legislation only requires the purchaser’s lawyer to have the signed form on file before registering the transaction with the land registry, the New Zealand Law Society recommends that the Residential Land Statement be completed before a sale and purchase agreement is even signed. We strongly endorse this approach to ensure parties do not inadvertently enter into illegal contracts.
It is imperative that all parties understand there are real risks to both the vendor and the purchaser if it later transpires that the purchaser is an offshore person. This is particularly important where settlement is due to occur months (or years) after the sale and purchase agreement has been signed.
Unless the vendor agrees to the contract being terminated, the buyer could forfeit some, or all, of the deposit and face other costs or penalties. The vendor, too, may face additional costs, including lost sale opportunities.
Real estate agents could also find themselves in a difficult position if they are required to refund the commission due to non-sale.
The above situation can be easily avoided by ensuring a Residential Land Statement is signed before the sale and purchase agreement is entered into. A copy of the Residential Land Statement can then be attached to the sale and purchase agreement so that all legal representatives can be assured that the contract will not fall over at a later date.
So, whether you’re a vendor or a buyer, it is in your best interests to check in with the real estate agent who’s leading the sale to make sure the Residential Land Statement is not only signed, as per the new law, but that it is signed before anyone goes anywhere near the dotted line on the sale and purchase agreement.
Whichever side of the sale fence you sit on, if you have any doubt whatsoever over the Residential Land Statement, seek urgent legal advice, and certainly do so before you sign anything (including a conditional sale and purchase agreement).
