Approval is needed where an “overseas person” acquires sensitive New Zealand assets. This article describes the key points about the process to be aware of in advance.

From our experience in obtaining OIO approval we have drawn together the following points which answer the key questions an investor has about the process and steps required.

Who is the OIO?

The Overseas Investment Act 2005 (OIA) is administered and enforced by the Overseas Investment Office (OIO) which processes the applications made. It is based in Wellington and its team is growing quickly as it deals with more applications and enforcement.

When is consent needed?

Consent is required for an “overseas person”. In basic terms that means a person who is not an NZ citizen or a person ordinarily resident in NZ. However, it is worth discussing individual circumstances as it may be complicated to work out if a person/entity qualifies.

What about related parties back overseas?

Even if the entity making the purchase is not an “overseas person” they may be an “associate” of an overseas person. If, for example, someone overseas is controlling their actions or funding the purchase. If so, then approval will still be needed.

What level of control are you talking about?

This is a very wide definition and can be specific or general, indirect or direct and whether actually legally enforceable or not. It is trying to capture the individual that is acting for someone else who would need approval if they were the one that applied.

So what is a “sensitive” New Zealand asset?

This can be complicated to determine but generally includes:

  1. certain types of land such as non-urban land of 5 hectares or more (that is, most farms);
  2. acquiring 25% or more ownership or controlling interest in an entity which has businesses assets worth more than $100 million (exceptions apply for Australians and some others that increase that threshold); and
  3. fishing quotas.

I am only interested in buying land – is it sensitive?

Determining if land is sensitive requires special analysis because, for example, it may include land that adjoins a reserve or public park or includes foreshore or seabed. So it may not be as simple as looking at the legal title description because you also need to look at what type of land there is surrounding it. Examples include land over 0.4 hectares that includes or adjoins reserves or historic or heritage areas, land on specified islands or if it is part of the foreshore or seabed.

If I need to apply then what do I need to show to get approval?

If you are an overseas person then when you make an application you will need to satisfy:

  1. Investor Test (good character, have business experience, be financially committed to that investment); and
  2. Benefit to New Zealand Test.

How do I show Benefit to New Zealand?

There are 21 criteria that the OIO will look at (eg will there be creation of new jobs). The OIO is also interested in understanding the ‘counterfactual’ – ie, what would happen if you didn’t make the investment (would someone else buy it, would they invest or not invest further money in it etc).

What if I am moving to New Zealand permanently, does that affect things?

Yes – in that situation you may not have to satisfy the Benefit to New Zealand test.

How long will all this take?

The OIO will categorise the application into one of three types and they will aim to respond within 30 – 70 working days, depending on the category of application. However, there is no statutory timeframe for the decision to be made so it could take less or more time, depending on the situation.

The OIO may also ask questions of the applicant which can delay the process so it is really important to get the application right when it is first submitted. Last year 22% of applications were initially rejected as they lacked information or were of poor quality.

In our experience the OIO process does take time to comply with but it is fairly straightforward. If you have questions about any of the topics mentioned above then we would be happy to discuss your situation with you.

 

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Should you need any assistance please contact Steven Moe at Parry Field Lawyers (348-8480) stevenmoe@parryfield.com

 

 

We have a lot of clients coming to us with a building project where the contractor or consultant proposes using a standard form contract. It can be confusing as to which one of these documents is best to use in different situations.

This is because different industry bodies have developed their own forms of standard contract. Sometimes having too many options means that there is confusion over the best one to use. In this article we have described the most common form of construction contracts and building contracts and given a comment about when they are most appropriate to be used. In the second part we have also set out what some of the key issues are that need to be considered every time (no matter what contract is used as a base).

 

Which form of building or construction contract?

Below we have set out the most common standard forms of contract. The references are to the most recent forms of each which is an important point to note because sometimes you may be given an earlier version. Generally the latest issued copy has been done for a reason and it addresses some inadequacy in an earlier iteration. So closely check what year the version you are asked to sign was issued.

  • NZS3910: 2013: This is one of the most commonly used construction contracts and is generally considered to be quite a “fair” standard form which is used for building and civil engineering construction.
  • NZIA: SCC1: 2014 The New Zealand Institute of Architects have produced this standard form which has a leaning towards protection of the architect involved in the project.
  • BuildRight BCC: 2016: This is a free document intended for use when constructing residential buildings in New Zealand.  It can be requested on the Build Safe website.  Note that it includes automatic provisions using their retention trust fund.
  • BuildRight BCS: 2016: As above, but this is for sub contract situations.
  • IPENZ and FIDIC: These two engineering bodies (the New Zealand Institution of Professional Engineers and the International Federation of Consulting Engineers) publish standard form documents which tend to include provisions that protect engineers.
  • NEC3: A suite of contracts that can be used for building projects but mainly used for large scale construction projects.
  • RBC1: 2016 (NEW BUILD): Prepared for use by Registered Master Builders it is available to them for use on building contracts.

In addition to those set out above their can be bespoke / one off forms which particular companies many propose be used.  The important point here is that there are a variety of options when it comes to a building contract or construction contract.  Knowing what the options are is a good first step to being able to decide which one would be best for your project.

Key issues to consider in your building or construction contract

There are a number of other practical points that should be covered in your agreement.  Even if there is a standard position in one of the contracts above it should be read and ensure that you are comfortable with it.  Key matters to consider include:

Indemnities: These are often “high risk” clauses, because they can trigger a liability to pay a sum of money without the party relying on the indemnity even needing to prove that the other party caused, or contributed to, a loss.  It is important to be clear about what exactly will trigger an indemnity, who it will cover and whether it is reasonable in the circumstances to require one at all.

  • Limitation of liability and exclusion clauses: These are commonly included and essentially involve one party trying to get out of, or limit, their liability.  Consider to what extent they should apply.
  • Insurance: The insurance position of each party should be clearly understood to ensure there is adequate insurance cover.
  • Construction Contract Act: If this applies then certain provisions will be included in agreements eg default provisions relating to payment.
  • Price and payments: How much is paid and when.  This may involve setting out milestone and deliverables.
  • Variations: How will these be requested and priced needs to be set out clearly and understood.
  • Disputes: How will these be handled if they arise.
  • Reporting: What reports are required and when – this will be important to be able to monitor progress of the project.
  • Health and safety: Who is responsible for what and who is a PCBU at the work site.  This is a hot topic these days and should be thought through in detail.
  • Sub contracting: To what extent will this be done, and who is responsible for this.  This is about ensuring clarity about who will actually do the work.
  • Security: Many contracts contain an agreement to mortgage which could result (in the event of non-payment, or even in a dispute over payment) in a caveat being lodged against the title to your property.
  • Termination: Ability to terminate in which circumstances and what happens if that occurs.

Building contractors must give consumers a Checklist and a Disclosure Statement published by the Ministry of Business, Innovation and Employment prior to signing a building contract for all residential building work valued over $30,000.00 (including GST), or where the consumer asks for the information irrespective of the value of the building work.

 

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Please contact Tim Rankin at Parry Field Lawyers (348-8480) timrankin@parryfield.com

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