New Zealand looks set to introduce changes to its land registration and purchase rules, which will effectively block buyers who are not ordinarily resident in or citizens of New Zealand from purchasing existing homes or land in that country.

So far, land not designated as "sensitive land" under the overseas investment rules was available for purchase to overseas buyers. So while large areas of rural land, beachfront properties and lifestyle blocks were restricted from foreign ownership, this did not apply to residential housing or apartments, and foreigners were allowed to buy into New Zealand.

And buy in they did – according to publicly available statistics, land sales in New Zealand rose by an astounding 600% between 2015 – 2016, much of this driven by overseas money. In a bid to curtail this, the government (a new one was elected in September 2017) promised to restrict the property ownership rules.

The new laws are likely to be implemented in 2018.

Going forward, consent for the purchase of land or an existing home in New Zealand will need to be obtained by overseas persons, effectively resulting in a screening process by the New Zealand authorities. New build homes or apartments are not likely to be covered by the new rules, so in these cases purchase might still be possible without consent.

A natural person is an overseas person under the Overseas Investment Act if they are neither a New Zealand citizen nor "ordinarily resident in New Zealand". For the purposes of the new law, a person will be ordinarily resident if they hold a permanent resident visa and have been residing in New Zealand for a minimum of one year and have also been present in New Zealand for at least 183 days in the previous year. The traditional overseas buyer may have been able to meet one of these conditions but meeting all three is highly unlikely.

So clearly, overseas buyers interested in buying land or holiday homes in New Zealand will be limited going forward. But what if you're already an overseas property owner without any connection to New Zealand – will this affect you?

The good news is that your current property ownership will not be affected. However, how you choose to transfer your property may be.

Let's say you have a holiday home in New Zealand which you wish to gift to your overseas children. Well, under the new rules, if those family members or relatives have no connection to New Zealand, you might be restricted from carrying out those wishes. Trustees of trusts which hold New Zealand property for the benefit of overseas beneficiaries (so those who are not ordinarily resident in or citizens of New Zealand) may also need special consent if they intend to distribute properties to such beneficiaries. Lack of consent could force a sale of the property by the trustee, to a New Zealand-based buyer.

The new rules are not law yet. Before this happens, trustees of trusts which hold New Zealand property for beneficiaries who are not ordinarily resident in or citizens of New Zealand, as well as individuals who own New Zealand property in their own name but are not residents or citizens of New Zealand, would do well to reexamine existing arrangements to clearly understand if these will be impacted under the new rules.

This alert is not exhaustive and does not cover every single aspect of referred laws. The information provided in this alert should not be construed as legal advice or legal opinion regarding any specific facts or circumstances.

This alert was provided by Anaford Attorneys, who have taken all reasonable care to ensure that the information contained in this alert is accurate at the time of publication.