New Zealand Legislation: Regulations

Statement of reasons

This notice, which comes into force on the day after the date of its notification in the Gazette and expires on 30 September 2012, replaces the Securities Act (Residential Property Developments) Exemption Notice 1999 (the 1999 notice).

This notice applies to participatory securities in the form of membership of an incorporated society, or a shareholding in a company, that owns, leases, licenses, maintains, administers, or operates communal facilities in a real property development.

The effect of the notice is that the developer and the society or company are exempted from the Securities Regulations 1983 (except regulation 8) and the following provisions of the Securities Act 1978:

• section 33(3), which relates to the appointment of a statutory supervisor:

• sections 37 and 37A, which contain the prospectus and investment statement requirements of the Act:

• section 38A, which relates to statements in advertisements by experts:

• section 54, which relates to certificates evidencing securities.

The Securities Commission (the Commission) considers that it is appropriate to grant these exemptions because—

• the securities exempted under this notice are memberships in societies and shareholdings in companies set up to own, lease, license, maintain, administer, or operate communal facilities in property developments. These memberships and shares are offered as ancillary features to real estate transactions of a type that are not subject to the Securities Act 1978. While the memberships and shares are securities in terms of the legislation, they are not offered as investments in the usual sense. Rather, the society or the company is established as a convenient vehicle through which residents in a property development can use and enjoy communal facilities and can be required to contribute to the maintenance of those communal facilities:

• the conditions of the exemptions require developers to give purchasers adequate information about the members' or shareholders' interest in the society or company, and the intended communal facilities (including the likely levies or fees associated with these):

• this notice expands on the scope of the 1999 notice in that it accommodates certain arrangements for holding communal facilities not included under the 1999 notice and allows a wider range of communal facilities to be included. The Commission is of the view that the policy of this notice is consistent with the policy underlying the 1999 notice, but provides for greater flexibility:

• the Commission has considered a number of individual exemption applications concerning property developments that are similar in purpose to those covered by the 1999 notice, but for which the arrangements for holding communal facilities or the nature of the communal facilities did not, for various reasons, fit within the terms of the 1999 notice. The exemptions provided and conditions imposed by this notice are generally consistent with these individual exemption notices.