Foreigner's Guide to Buying Abandoned Houses in New Zealand

New Zealand offers a unique and potentially lucrative market for foreign property investors, particularly in abandoned houses. These properties can often be found at below market value, making them attractive investment opportunities. However, navigating the legal and financial landscape can be challenging. This guide aims to provide a comprehensive overview on how foreign buyers can invest in abandoned houses in New Zealand.

Legal Requirements for Buying Property

Before diving into the market, foreign buyers need to be aware of several legal requirements and procedures. Firstly, acquiring an Internal Revenue Department (IRD) number is mandatory. This is a tax-related identification number that all residents and non-residents must have. Moreover, any overseas tax numbers must also be declared. These numbers are essential for tax compliance and financial transactions in New Zealand.

Buying Abandoned Houses

When considering buying an abandoned house, it's important to note that such properties might be available at below market or replacement value. This is often due to several reasons such as the location or an issue like mortgagee sales, where the property is sold due to non-payment of bills or a mortgage. One notable example from Auckland involved a property sold due to a non-payment of rates bill. The new owner faced the challenging task of evicting the old owner and suing for costs and damages.

In another instance, a bank in Auckland sold a property where the old occupants were still living. This highlights the complexity and potential complications that can arise in these scenarios.

Specific Considerations for Auckland

Auckland, in particular, has unique challenges due to leasehold systems and significant increases in land prices. In some areas, like Cornwall Park, leasehold properties are subject to high rent increases, often leading to property values collapsing. This issue has caused many homes to become abandoned due to the inability of former owners to meet the financial obligations. Therefore, it's crucial to understand the specific legal and financial implications of such areas.

Rental properties in New Zealand are protected by the Residential Tenancies Act, which provides tenants with substantial rights. Overseas owners must appoint a local agent to manage the property and review the behavior of tenants. This also mandates that landlords must provide timely repairs, and tenants cannot be evicted without notice or without just cause.

Land Information Memorandum (LIMS)

Before making a substantial investment in an abandoned house, it's advisable to obtain a Land Information Memorandum (LIMS). This report, available from the local council, includes crucial information about the property, such as zoning, environmental conditions, and potential restrictions. Obtaining a LIMS can be made a condition of sale, ensuring buyers are fully informed about the property's history and current status.

Moreover, conducting a building survey is another critical step. Any faults identified can be used as a reason to reduce the purchase price, ensuring that the investment is not affected by unexpected repairs. These surveys are essential for maintaining financial transparency and protecting the buyer's interests.

Lawa and Legal Assistance

NZ law requires that a lawyer processes the sale and oversees the exchange of funds between the buyer and seller. This is to ensure that transactions are completed legally and that buyers are protected from fraudulent activities. It's highly recommended to work with a reputable lawyer who is familiar with the local laws and procedures.

Foreigners who plan to work in New Zealand must obtain the necessary permits. Ownership of property does not grant permission to work illegally; doing so can result in deportation. Therefore, it's crucial to understand the immigration regulations and ensure compliance.

Conclusion

Investing in abandoned houses in New Zealand can be a profitable venture, but requires careful planning and adherence to legal requirements. Understanding the process, legal framework, and potential challenges will help foreign buyers navigate the market successfully. By being informed and prepared, you can make the most of the opportunities available in this dynamic property market.