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DOING BUSINESS IN NZ: Buying and developing property

01 June 2015

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New Zealand uses the Torrens land registration system under which most parcels of land have their own titles showing dimensions and location, and recording ownership and other interests affecting the land.  The government guarantees the accuracy of titles, which can be searched by the public for a nominal fee. 
Chapman Tripp provides a full title searching service. 
The primary attraction of the Torrens system is that dealings can be conducted in reliance on a single title, rather than on a succession of title deeds.  New Zealand has converted almost all titles, plans and instruments into an electronic format, allowing real-time searching and electronic registration of all land title and surveying transactions. 
Under New Zealand law, buildings and other improvements permanently attached to the land form part of the land itself and pass with ownership of the land, unless the current owner and a purchaser agree otherwise.

Contracts for sale and purchase of land

To be enforceable under New Zealand law, a contract for the sale and purchase of land must be in writing and signed by the parties involved or their authorised agents.  Once signed, an agreement for sale and purchase becomes legally binding on all parties.  It can, however, be made subject to conditions which protect the seller or buyer.
Common conditions are:
  • the buyer raising finance
  • the buyer being satisfied with valuation, local authority information relating to the land, engineering reports and building reports, and
  • the buyer being satisfied with the title.
Where a real estate agent is engaged by a seller to effect a sale, commission is payable by the seller.  There is no stamp duty.
Dealings with land are registered electronically against the title.

Resource Management Act and district plans

The Resource Management Act 1991 (RMA) is New Zealand’s principal statute relating to the use of land, water, minerals, the coast, air and physical resources.  The Act aims to promote “sustainable management of physical and natural resources”.  The Act also seeks to maintain and enhance New Zealand’s “clean, green” image. 
The RMA has major implications for industrial projects and property developments.  A new development may require a number of consents under the Act before it can go ahead. 
Controls on development are administered by locally elected government authorities and are expressed through a range of publicly notified plans.  These include regional plans, regional coastal plans and district plans.  Plans set out rules for activities in various locations or “zones”.  Parties seeking consent to proceed with a development must follow the procedures set out in the relevant plan.  This may involve public participation through the public notification of the consent application.
Privately owned land may be designated in the district plan as being required by the government for a public work (compulsorily if necessary).  The current market value of the land would be paid as compensation. 

Building works

The Building Act 2004 is designed to regulate and control building work and the use of buildings.  Every new building and most substantial alterations or additions to existing buildings will require a building consent.  Multiple-use approvals are available for group home builders who build homes throughout New Zealand using the same or similar plans. 
On completion of works, a code compliance certificate will be issued, provided compliance with the building consent has been satisfied. 
Allied to the Building Act is the Building Code.  This sets criteria to ensure buildings are safe, sanitary, have adequate means of escape and, in the case of public buildings, have access and facilities for disabled persons.  Existing buildings, which are being altered, may require upgrading in the course of the alterations in order to comply with these criteria as nearly as is reasonably practicable.  Buildings considered earthquake prone may also be required to be upgraded.
The Act imposes restrictions upon occupation of a building where public areas of that building are subject to building works for which a code compliance certificate has not yet been issued. 

Stratum estates

The Unit Titles Act 2010 allows titles to be issued for parts of buildings, for example an apartment or industrial park.  The Act provides for a body corporate (comprising the unit owners) to be established, with a set of rules governing the use and maintenance of the building.  The body corporate is tasked with insuring the building and controlling and maintaining the common areas.  The unit owners pay a body corporate levy to cover its expenses.  Before buying a unit, the vendor is required to provide to the purchaser a pre-contract disclosure statement setting out prescribed information relating to the body corporate, including information regarding body corporate levies.  The information set out in the pre-contract disclosure statement will typically be provided by the body corporate secretary. 

Barriers to buying land

In general, there are few restrictions on the purchase of land in New Zealand, unless that land falls within one of the regulated categories under the Overseas Investment Act 2005.  For a detailed discussion of the screening regime, refer to the Overseas Investment Regime chapter.  There are restrictions on the sale of land held by government agencies, which will need to be resolved before any sale to a private party (whether local or overseas) can proceed. 

Māori land claims

Land claims by Māori, the indigenous people of New Zealand, are governed by the Treaty of Waitangi Act 1975.  Under the Act, grievances are heard by the Waitangi Tribunal which can then make recommendations to the government regarding the resolution of those grievances. 
Recommendations for the return of land to Māori are generally applicable only in respect to land owned by the government or State-Owned Enterprises.  Privately owned land is not subject to return to Māori ownership unless the title to the land has been specifically endorsed to that effect (and even then, current policy is not to exercise that right).  If it was exercised, the current market value would be paid.


Access to and rights to prospect, explore and mine New Zealand’s extensive petroleum and mineral estate, including coal, are governed by the Crown Minerals Amendment Act 2013 and Minerals and Petroleum Programmes issued under it.
All petroleum, gold, silver and uranium existing in land (including under the sea) is the property of the Crown (government).  No person may prospect, explore for, or mine, government-owned minerals without an appropriate permit.
The Minerals Programmes govern the policies and procedures applicable to the management of government-owned minerals, coal and petroleum.  By and large, a permit will be awarded to the person most likely to prospect, explore or develop the resource effectively and in accordance with the permit obligations and good practice. 
Return to the government is assured through a royalty regime, although there is provision in the Act for the government also to participate in any given permit and thus derive a fair financial return through that avenue.  The current policy is, however, not to exercise this right.
All transfers of or other dealings with a permit interest require the consent of New Zealand Petroleum & Minerals to be effective.
More information is available at: www.nzpam.govt.nz

Residential property

Gains from the sale of residential properties purchased after 1 October 2015 and held for less than two years will be taxed at the owner’s income tax rate.  Exemptions will apply if the property is:
  • the seller’s main home
  • inherited from a deceased estate
  • sold as part of a relationship break down.
This “bright line” test supplements the current law.  Gain from sale of a property held for longer than two years may still be taxed if the Inland Revenue Department (IRD) considers that the seller acquired the property for a purpose or intention of resale, or if one or more of the specific land taxation provisions applies (for example, if the seller carried on, or was associated with someone who carried on, a business of land dealing, land development or building at the time of acquiring the property and sells that property within ten years).
Residents and non-residents will be required to provide an Inland Revenue Department (IRD) tax number as part of the usual Land Information New Zealand transfer process (unless the property is their main home). 
A non-resident will also be required to have a New Zealand bank account and to provide a home jurisdiction tax number together with another form of identification, e.g. a passport.  These information requirements are intended to provide the IRD with the information to enforce the two-year rule.
The government is currently investigating a withholding tax for non-resident property owners, to ensure that they pay what is due on their New Zealand property investments.  If implemented, this would likely come into effect in mid-2016.

We make every effort to ensure the accuracy of the information provided but it should not be relied upon as a basis for making business decisions as circumstances, business conditions, government policy and interpretation of the law may change.