The State government announced in late January that it would seek to introduce a new rating system which will rate so-called “dodgy developers”. The proposed ratings system will be based on a calculation of several factors including customer complaints, the length of time a developer has been in business, history of the business, work safety record of the business, suspicions of “phoenixing” activity (where companies are deregistered after incurring debt and then a new business reemerges) and financial credibility, amongst other “metrics”. The rating system is scheduled to come into effect from July later this year.
The rating of a developer will not be publicly accessible in the first instance, but the government has flagged that “there may be an opportunity to open it to other uses in the future” 1 . The rating will be available to purchasers as a pre-purchase report. Presumably it will be similar to the credit risk report one can obtain when investigating the financial viability of a company. A buyer will be able to purchase this report as part of its due diligence prior to exchanging contracts with a developer for an off the plan purchase.
The new ratings system does nothing to ensure a high-quality standard of construction. By itself, the system will not prevent poor workmanship or the use of poor or second-hand materials by builders. However, this rating system coupled with the new NSW Building Commissioner’s powers will be a welcome change for off-the-plan buyers. The powers of the NSW Building Commissioner will include disallowing the issue of an occupation certificate from the Council or the private certifier for poorly constructed buildings and enable buyers’ to have their deposits returned to them in the event an occupation certificate is disallowed.
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1 Spokesperson for NSW Better Regulation Minister, Kevin Anderson, January 2020
