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First Penalty Against An Overseas Investor Leasing Land Without Consent

The Auckland High Court has ordered an overseas investor to pay a penalty of $49,000 and $15,000 in costs for failing to get consent from the Overseas Investment Office (OIO) before entering a long-term lease.

This is the third court ordered penalty decision for breaches of the Overseas Investment Act in recent weeks, and the first court case involving an overseas investor leasing land in New Zealand.

Justice Edwards said “breaches involving leases should not generally be regarded as less serious than those involving the purchase of freehold land”.

In 2014, Mr Bin Zhao (the investor) agreed to buy 20.5 hectares of land in Coatesville for $6 million. The purchase agreement was conditional on OIO approval, however, approval was not sought and the sale did not go ahead at the time.

On the same date of the purchase agreement, the investor also entered a 10-year lease over the land for $1 per year with a 10-year right of renewal. The vendor’s solicitor prepared the lease, and the investor did not seek independent legal advice.

In 2018, Mr Zhao consulted a different lawyer, and at that point, he reported the breach to the OIO. He promptly admitted liability and cooperated with the OIO’s investigation, including attending a voluntary interview.

OIO Group Manager Anna Wilson-Farrell said: “While the investor may not have purchased the land, he did obtain a significant long-term interest in the land and he should have applied for consent.

“Failing to seek consent to enter into a long-term lease should not be considered a low-level breach, as this decision has shown.

“We always recommend that overseas investors get specialist independent advice on the Overseas Investment Act before they enter into any agreements.”

More information on the penalty decision can be found here.

More information on how the Overseas Investment Office takes enforcement action can be found here.

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