IRD numbers
You will have read of the upcoming changes in the law – that affect the sale and purchase of land. These come into effect on 1 October.
- If the buyer is an individual or a couple buying their main home in their own name and they are not an "overseas person" they are exempt from the requirements.
- Almost everyone else must provide their IRD number to LINZ before settlement can be completed.
- An overseas person must open a bank account as a pre-requisite to getting an IRD number.
- All trusts buying property must have an IRD number (there are thousands of family trusts that own homes and do not have IRD numbers).
These changes will be an administrative pain for lawyers but what is certain is that we will all get very used to them very quickly.
What they mean for property developers and their lenders is a change in settlement time frames and the potential for unexpected delays on settlement. It will not always be easy to effect a fast settlement.
The provision of information required by the vendor is unlikely to hold things up but the provision of information required by multiple buyers may.
Here are a few suggestions to minimise that risk.
- Do not rely on the purchaser to have all of their information ready. Be proactive and if the contracts are already signed do start checking all information is available well before settlement.
- If the contract is not signed yet try and capture the requisite information in it (or see if you can persuade the agent to capture it in the listing agreement).
- Consider restricting the right of the purchaser to nominate so that they can only nominate up until a certain time – leaving plenty of time before settlement to establish an entity, open a bank account and get an IRD number.
- The exemptions are complex and unclear. Assume everyone needs to provide the IRD number unless your lawyer categorically tells you otherwise.
Anti-Money Laundering and Countering Financing of Terrorism Act 2009
From early 2016 lawyers will be required to collect information about payers when funds are paid into trust accounts. This may change how deposits are paid. Typically in a development at least the initial deposit is paid directly to the vendor’s lawyer’s trust account to be held by them as stakeholder.
The level of information required depends on who pays. Requirements of government departments are less onerous than requirements of overseas individuals for example. As a guide lawyers must:
- Determine whether individuals, trustees and directors and shareholders of companies are politically exposed, holding assets in trust, or from a country with limited AML systems.
- In the simplest of cases obtain a copy of a passport, the date of birth, IRD number and address of the payer.
- In other cases gather additional information about the source of the wealth.
The penalties for non-compliance are harsh.
Exceptions are made for payments received from lawyers, agents and financial institutions. Once the regime is in place you can expect deposits to be required to be paid via a purchaser’s lawyer’s trust account.
