7 July 2026

Rural Property Transactions – Don’t Overlook ETS Registered Land

When buying or selling rural property, one important consideration is whether any of the land is subject to New Zealand’s Emissions Trading Scheme (ETS). While this may not affect every property, it can have significant financial and legal implications where forestry is involved.  In particular, you may be liable to pay for the resulting greenhouse gas emission if you deforest any land that is subject to the ETS.

The ETS is designed to encourage the reduction of greenhouse gas emissions by rewarding eligible forest owners with New Zealand Units (NZUs) for carbon stored in their forests. However, registration also brings ongoing obligations, including maintaining forest cover and meeting compliance requirements.

For vendors, it is essential to disclose whether the property contains ETS-registered land. Buyers should understand whether NZUs have already been claimed, whether any liabilities will transfer with the land, and what future obligations they may inherit.

Before completing a purchase, buyers should carry out appropriate due diligence. This may include reviewing the property’s title, obtaining details of any ETS registration, and seeking professional legal or forestry advice where necessary.  This includes identifying any old stands of exotic trees that may be deemed pre-1990 forest and automatically subject to the ETS without being formally registered.

Understanding the ETS status of a property helps avoid unexpected costs and ensures both parties are fully informed before settlement. As with any rural property transaction, early investigation can help make the buying or selling process smoother and provide greater confidence for everyone involved.

Client Guide: Buying or Selling Property with ETS Registered Land

If you are buying or selling rural property, it is important to establish whether any part of the land is registered in New Zealand’s Emissions Trading Scheme (ETS). ETS registration can affect the value of a property, the ownership of carbon credits, and the legal obligations that transfer to a new owner.

What is the ETS?

The New Zealand Emissions Trading Scheme (ETS) is a key tool for New Zealand meeting our domestic and international climate change targets set by the Climate Change Response Act 2002.  The ETS is designed to encourage the establishment and protection of forests by allowing eligible forest owners to earn New Zealand Units (NZUs), commonly referred to as carbon credits. These units have a market value and may be sold or retained as an investment.

What happens to the NZUs?

One of the most common misunderstandings is that NZUs automatically transfer with the sale of the land. They do not, as they remain personal property of the individual or entity who earnt the NZUs.

Unless the sale and purchase agreement specifically provides otherwise:

• NZUs that have already been earned and issued remain the property of the person or entity that owns them, regardless of who owns the land after settlement.
• The purchaser does not automatically receive the vendor’s NZUs.
• The parties can negotiate whether some or all NZUs will be transferred as part of the sale, but this should be clearly documented in the sale agreement.

It is also important to determine whether the vendor has already claimed NZUs for the registered forest, as this may affect future earning potential and any liabilities associated with the land.

What obligations come with ETS registered land?

Purchasing ETS-registered land may also mean taking on ongoing responsibilities under the ETS.

Depending on the type of ETS registration, being pre-1990 forest land or post-1989 forest land. The distinction is based on when the land first became forest and has significant implications for carbon credits, liabilities, and land management.

The distinction between the two classifications of forest land exists due to the 1 January 1990 cut-off for pre- 1990 forest and reflects international climate accounting under the Kyoto Protocol. Forests established before this date are treated as an existing carbon stock that should be retained, whereas forests established after this date are acknowledged for their additional capture of carbon.

Both classifications have differing obligations under the ETS, some of which may include:

• maintaining the registered forest in accordance with ETS requirements;
• ensuring any harvesting complies with the relevant ETS rules;
• accounting for emissions if the forest is cleared, deforested, or otherwise removed without re-establishment;
• notifying the relevant government authority of changes in ownership where required; and
• complying with reporting and record-keeping obligations.

If forest carbon stocks decrease below the level for which NZUs have been earned, the registered participant may be required to surrender NZUs back to the Government. This can represent a significant financial liability if it has not been identified before settlement.

Due diligence for buyers

Before purchasing a property with ETS-registered land, buyers should:

• confirm whether the land is registered in the ETS;
• determine the type of ETS registration and who is currently the registered participant;
• establish whether any NZUs have already been earned, sold, or remain available;
• understand whether any current or future liabilities may arise; and
• obtain legal, forestry, and accounting advice where appropriate.

Considerations for Vendors

Vendors should ensure they provide accurate information about the ETS status of the property. This includes disclosing whether the land is ETS registered, whether NZUs have been claimed or sold, and whether any obligations or liabilities remain attached to the registration.

We can help

ETS-registered land adds another layer of complexity to a rural property transaction. Understanding who owns the NZUs, what liabilities may exist, and how those matters should be addressed in the sale and purchase agreement can help avoid costly surprises after settlement.

If you are buying or selling a property with ETS-registered land, we can help you understand your rights and obligations, undertake the necessary due diligence, and ensure the transaction documentation properly reflects the parties’ intentions.

Quinn is a Solicitor in our Property Team and can be contacted on 07 958 7475.