When Matt Lauer was recently fired from NBC’s “Today” show for alleged sexual harassment, a little-known stipulation of New Zealand real estate law was thrust into the spotlight as it became apparent the television personality might also lose his US$9.2 million New Zealand ranch.
To buy the ranch Mr. Lauer had to pass a “good character” test, applied to all foreign buyers of New Zealand real estate over five hectares (12 acres), whether leasehold or freehold. He was approved in February, and bought the leasehold to a luxurious home on the picture perfect South Island, joining high-profile neighbors like director James Cameron and PayPal founder Peter Thiel.
Yet it is not enough to just pass the test, buyers must also continue to be of good character: “We are currently seeking further information,” Lisa Barrett, a spokeswoman for the government agency which approved the deal, told Mansion Global. “There are a range of regulatory tools or actions we can take if we believe the Overseas Investment Rules have been broken. The Overseas Investment Office can seek orders, through the Courts, that require people to dispose of property.”
Passing the “good character” test is a lengthy process, which can be as tortuous as getting approval from the notorious New York City co-op boards. “The OIO application can take up to six months,” said Mark Harris, managing director and owner of New Zealand Sotheby’s International Realty. “If there is any criminal record, or charges, or suspicious investments, or in fact any sort of unusual behavior, buyers would usually be turned away. They also need to prove what sort of benefits are going to be provided to New Zealand by the foreigner purchasing.”
There is no in-person interview required, though, and approval all rests on paperwork.
Foreign buyers are required to pay an application fee to the OIO when they buy a property, ranging between NZ$22,000 and NZ$49,000 (US$15,391 and US$27,285), depending on the type of property. Buyers are advised to seek legal advice to help them with the application (although it’s not essential), and many also donate funds to local charities so they can show they are contributing to the local economy.
In addition, the new government is planning to tighten laws further by broadening the scope of the test, applying it to all existing dwellings by early next year, not just those over five hectares.
It’s enough to put some buyers off, which is probably the point. There’s been a surge of interest in New Zealand from luxury international buyers from the U.S. in the last 12-to-18 months, reported Mr. Harris, yet the result is that locals are being priced out.
International buyers are attracted by the stunning scenery of peaceful beaches and mountains, the stable government and economy, and the English language. In the past, New Zealand might have been held back by its isolation, yet as flight routes have multiplied and geopolitical uncertainty ripples through the world, its isolation has come to be seen as an advantage.
Unofficial resorts in the U.K.
Like New Zealand, the U.K. also has a system of some leasehold properties, where you own a property only for a short period of time, many period apartments in central London owned by historic large estates are leaseholds, as are some new builds where unscrupulous landlords are using the system to extract ever-increasing ground rents.
However there is no “good character” test in law for any real estate purchase whether leasehold or freehold, although some of the more elite gated estates have unofficial controls about who they let in.
At the Lakes by Yoo, for example, an exclusive gated development in England’s bucolic Cotswolds countryside, co-founded by designer Philippe Starck and developer John Hitchcox, they’ve only turned away two people since launching. “There was somebody going around knocking on doors asking which celebrities live here, and another gentleman with a red Bentley who I got the impression was looking for a gate between him and the police,” Mr. Hitchcox said. “I just couldn’t see them fitting into our community, which is about family and like-minded people, who appreciate going to the countryside without all the headaches of managing your own estate, and where the kids can learn tennis, cycling, sailing and the adults can meet over the barbeque.”
This sort of scenario is rare however, as Henry Pryor, a U.K.-based buying agent who purchases properties for high-net-worth individuals, points out: “Historically some pretty dodgy folk have owned property here, and I would expect them to continue to do so,” he said.
New York restrictions are subjective
The most restrictive market for the luxury buyer is New York in the form of the much feared co-operative, which still represents 80% of the sales market, even though it is gradually declining in favor of the less restrictive condominium.: “The cooperative is the last bastion of discrimination we have in the United States; its effective and it’s legal,” said Nikki Field, a senior broker with Sotheby’s in New York. “The board sits in judgment of the applicant who is buying shares in a co-operation, and they are notorious and infamous. Different co-ops have different standards, but a co-op of note maintaining their exclusivity and value can be extraordinarily discriminating about the character of an applicant.”
Ms. Field cites Google searches as a major problem for potential co-op owners. “A lot of people might have been accepted as beloved neighbors in the past, but now one just has to Google the applicant and any number of things may come up,” she said. “It could be true, it could be false, but if he’s a womanizer and cheated on his wife, the female board members don’t want this guy.”
Co-ops are concerned with the reputation and value of their building, and as such they will request detailed financial records and numerous letters of referral, which is one reason why the condominium market is rising as people can’t face the arduous application process and its potential for public disclosure. “In the end they are just a group of well-meaning neighbors who only want to see quality people in the lobby or elevator,” Ms. Field said. “Would Mr. Lauer get into a co-op now? Not a single one.”
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