Property Developers and Foreign Investment: How the Rules Have Changed

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Property Developers should note the recent changes to Foreign Investment Rules.

Property developers should review marketing strategies in light of recent changes to the Foreign Investment rules. I realise that this information will not be of interest to the average investor in property, however the changes in the foreign investment laws will certainly impact on builders and property developers whose target market includes foreign investors.

Most property developers will be aware that any contract for the sale of residential property to a foreign investor has to be conditional on the Foreign Investment Review Board (FIRB) giving approval to the sale.  If this is overlooked then the contract will be void. This has serious implications for property developers obtaining finance for property developments to get them “out of the ground”.

Of course, another important aspect is the foreign investor actually making that application to the FIRB for approval. Previously, this important application for approval to the FIRB could be made free of charge.

As from 1st December 2015, any application to the FIRB must be accompanied by the applicable fee.  For a property less than $1,000,000.00 the fee is $5,000.00 but the fee increases with the value of the property. Any property greater than $1,000,000.00 will incur an application fee of $10,000.00 with an extra $10,000.00 required for each additional $1,000,000.00 in property value.

As has previously been the case for certain “off the plan” developments, a blanket approval may be applied for in advance by the property developer.  An application fee of $25,000.00 applies to this blanket approval.  In addition to this, further fees for each property sold to foreign investors must be paid.  That is, the developer may obtain a blanket approval to sell to foreign investors, but each individual sale to a foreign investor will still incur a fee of $5,000.

It is understood that the ATO will be responsible to regulate and establish a register in relation to foreign ownership of residential real estate from the 1st July 2016.

If you are a builder or developer and these changes are of concern to you, please contact MMLaw for further information.

 

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Disclaimer

The content published in this Blog is in the form of academic papers and the opinions expressed herein are generalised. The information provided is for educational purposes, not specific legal advice.

The application of any principles referred to can alter from case to case and accordingly you should seek independent legal advice in respect of your individual circumstances.

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