5 July 2019
Overseas investors fined almost $3 million for illegal purchase of Auckland properties
The High Court yesterday ordered the overseas owners of two rural properties at Warkworth, north of Auckland, to pay
$2.95 million to the Crown after an Overseas Investment Office (OIO) investigation found they were bought without
consent.
The properties were bought in 2012 and 2014.
The court ordered the owners to sell the properties and pay penalties, costs and the gain made on the investment.
The overseas owners – Chinese businessmen Zhongliang Hong and Xueli Ke, and IRL Investment Limited and Grand Energetic
Company Limited – should have applied to the OIO for consent to buy both properties because they are rural land of more
than five hectares.
Land Information New Zealand Group Manager, Overseas Investment Office, Vanessa Horne said the penalties recognised the
significant breach of the Overseas Investment Act.
“Our rural land has special protections under the Overseas Investment Act to ensure that overseas investors meet certain
requirements to be able to buy it.
“The OIO will continue to investigate people and companies that do not respect the safeguards the Act provides for this
sensitive land.”
The two properties illegally bought are:
• 185 Sandspit Road. In January 2014 IRL (ultimately owned by Mr Hong and Mr Ke) bought the land for $4,480,000.
On 18 June 2019 the property sold for $10,100,000, following the OIO investigation. A gain of $2,335,256 was made on the
sale after deducting expenses such as legal costs and interest.
•
• Kourawhero Lodge at 471 Wyllie Road. In July 2012 Mr Hong and Mr Ke bought the lodge for $2,550,000 through an
associate. In April 2014 they transferred the land to Grand Energetic Company (ultimately owned by Mr Hong and Mr Ke).
The lodge is due to be settled on 16 September 2019 for $3,250,000. No gain will be made on the sale after deducting
expenses.
•
The OIO began its investigation of the transactions in October 2016. Mr Hong and Mr Ke changed lawyers three times
during settlement negotiation with the OIO, which caused delay as each new set of solicitors had to be re-instructed and
negotiations re-started.
At the time of the breaches, the Overseas Investment Act allowed a maximum penalty of $300,000 or the quantifiable gain
made on the sale of the property, whichever is higher. Since the Overseas Investment Act was amended last year, the
available penalty is now $300,000 or three times the quantifiable gain.
During the investigation Mr Hong and Mr Ke applied for retrospective consent to buy the properties. However, the OIO
declined to grant consent because the investment did not provide enough benefits to New Zealand under the test to buy
rural land.
ends