Question
of the week
Question of the week

Curious. Interesting. Informative.

06 April 2018

Arrested Development

Sale, Purchase, Mortgage, Lease
Federal

Asked

FIRB approval – Change of condition of consent

I have a question in relation to overseas foreign vendors looking to sell vacant land. They bought initially with Foreign Investment Review Board (FIRB) approval with a condition that the land was subject to development within 24 months. Their personal circumstances have changed, and they now want to sell the vacant land – no building has been constructed.

The agents seem to have no issues with selling these blocks of land for overseas investors. Is it correct to advise vendors that in these circumstances they need to seek FIRB permission to sell and to not proceed until proof of FIRB permission to sell has been given? Or do the FIRB not actually give approvals to sell?

It is my understanding that selling vacant land in this scenario is a breach of the rules (land banking) and conveyancers, solicitors and real estate agents should not assist clients to sell land in these circumstances as it would amount to knowingly assisting them to breach the FIRB rules, which is subject to civil and criminal penalties.

Your advice would be appreciated.

Answered

The investor must make an application to the FIRB for a variation of the approval: s 76(6) Foreign Acquisitions and Takeovers Act 1975. The application must be made as soon as it is known the conditions of the approval will not be met.

The FIRB has unlimited discretion on whether to vary the approval and if it does, on what conditions. There is guidance available on the FIRB website and they take phone enquiries. Each matter is taken on its own merits. An application based on a change of circumstances outside the investor's control has a much greater chance of success.

A practitioner should decline to take instructions if the investor proposes to sell the property without complying with the conditions of the approval under which the property was purchased and has not applied for a variation.

Regards,

Mentor