Overseas businesswoman fined $110,000 over purchase of $9.4m Auckland properties with WWII heritage site

A Chinese businesswoman has been fined $110,000 after buying “sensitive land” in Auckland with a World War II gun emplacement for $9.4 million without consent.

Cong Zhang bought two adjoining properties in Mellons Bay in September 2015 to use as her family home.

But as a overseas person she was required to obtain consent under the Overseas Investment Act 2005 because the land is next to the foreshore, exceeds the land area threshold and has a Heritage New Zealand listed site – the bunker built in 1942 due to the threat of Japanese invasion.

Zhang admitted she breached the laws and was fined $110,000 this month by the High Court at Auckland and ordered by Justice Gerard van Bohemen to pay $15,000 in costs to Land Information New Zealand (LINZ).

The Chinese citizen had been approved in principle for a residence class visa in July 2015, however, the visa was not issued until March 2017, according to the court’s judgment.

LINZ acknowledged that when Zhang acquired the properties she believed she had ordinarily resident status in New Zealand because Immigration New Zealand approved her application in principle.

However, this belief was based on a misunderstanding the approval was sufficient when Zhang didn’t have the status until March 2018 when she entered New Zealand.

“It is common ground that the breach was inadvertent,” Justice van Bohemen’s decision reads. “Ms Zhang was not attempting to circumvent the system for personal gain.”

Zhang had also applied for consent in 2013 but was refused.

“On the facts, it appears that this property was used as a family home. Ms Zhang’s mistaken belief that her residency ‘in principle’ made her ordinarily resident may be understandable at a human level,” Justice van Bohemen said,

“However, a modicum of due diligence by Ms Zhang or her advisors, which could reasonably be expected in a purchase of this scale and significance, should have corrected that error.”

Zhang’s lawyers, including Michael Heron QC, and LINZ agreed the breach was “moderately serious” given the size of the properties (0.61 hectares), the heritage value of the gun emplacement, the joint rateable value of $13.78m, the purchase price of $9.4m and its location next to the foreshore.

Overseas Investment Office (OIO) group manager Anna Wilson-Farrell said people applying for New Zealand residency should not make assumptions about their status before buying property.

“It is important for overseas people to get specialist advice about when they can legally buy property and when to apply for consent,” Wilson-Farrell said in a statement.

“We will continue to take action when people fail to follow the rules.”

In April, the High Court at Auckland handed out the first penalty in New Zealand against an overseas investor leasing land without consent.

Bin Zhao was ordered to pay a penalty of $49,000 and $15,000 in costs for failing to gain consent from the OIO.

It came after Zhao agreed to buy 20.5 hectares of land in Coatesville for $6m in 2014.

The purchase agreement was conditional on OIO approval, however, approval was not sought and the sale did not go ahead at the time. But on the same date Zhao instead entered a 10-year lease over the land for $1 per year with a 10-year right of renewal.

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