Foreign buyers to pay $3 mln over unlawful rural land purchases
By Paul McBeth
July 5 (BusinessDesk) - Foreign buyers will end up in the red after agreeing to pay almost $3 million in penalties for purchasing rural land north of Auckland without Overseas Investment Office consent.
The High Court yesterday ordered Chinese businessmen Zhongliang Hong and Xueli Ke, and IRL Investment and Grand Energetic Company to pay $2.95 million for breaching the Overseas Investment Act when they bought two properties in 2012 and 2014. They paid about $4.5 million for one of the sites and stood to gain $2.3 million when they sold it for $10.1 million in June this year. The other site was bought for almost $2.6 million and is due to be sold for about $3.3 million in September at no gain after deducting expenses.
After the penalty, that will mean the businessmen will be in the red by about $600,000. At the time of the breaches, the law allowed for a maximum penalty of $300,000 or the quantifiable gain made on the sale of the property, whichever is higher.
"Our rural land has special protections under the Overseas Investment Act to ensure that overseas investors meet certain requirements to be able to buy it," OIO group manager Vanessa Horne said in a statement.
"The OIO will continue to investigate people and companies that do not respect the safeguards the act provides for this sensitive land."
Hong, Ke and the companies admitted their liability, and the settlement shows the businessmen will each pay $307,500 and IRL $2.3 million. Hong and Ke will also each pay $10,000 to help cover the regulator's monitoring and enforcement costs.
The OIO began its investigation in October 2016, but the settlement was delayed when the businessmen changed their lawyers three times.
Hong and Ke applied for retrospective consent to buy the properties but were rejected as the OIO didn't deem their investment would provide enough benefit to New Zealand under the rural land test.