Just over a month until developer ratings roll out

The New South Wales Government has been making a conscious effort to improve consumer confidence in residential buildings and developments.

As part of the suite of changes is the introduction of a transparent rating system to improve consumer confidence in quality operators and encourage compliance with best practices.

What is the rating system?

From March 2022, the rating system will roll out, and up to 100 property developers will be rated out of five stars. The rating will take into account each developer’s credit rating, capability, capital and defect history. Developers will be encouraged to publicly display the rating of the entity responsible for the project, including on all consumer-facing materials.

Minister for Better Regulation Kevin Anderson says that “ratings will paint a clear picture of a developer’s trustworthiness and the predictability of whether they are likely to construct a compliant and safe building and have the capacity to fix issues if they do arise in the future.”

Will the ratings work?

In our view, these ratings are being used by the Government and Building Commissioner, David Chandler, to address the key fears of potential apartment buyers – who are typically concerned about the quality of the build and the solvency of the builder/developer. This is part of a broader push to restore public confidence in this space.

On that basis, additional transparency and information in the market will likely be positive for consumers.

However, the usefulness of the ratings will depend on the uptake by developers. The rating system will not be compulsory. Therefore, the more unreliable operators in the market will simply decline to have a rating and consumers will be no more informed.

For example, a young couple is looking to buy an apartment “off-the-plan”. They are looking at four different developments. One developer who has a five-star rating has built a luxury development that is out of their price range. The other three developments are within their price range, but the developers have declined to have a rating. The young couple has no choice but to choose one of the three unrated developers, with no information about the solvency, quality, or history of the developers. In this situation, the rating system has not addressed their fears or assisted the young buyers at all.

Therefore, as in this example, whilst transparency and information in the market may assist some consumers, the impact on the market and consumer confidence will depend on the willingness of developers to participate.

 It will be interesting to see how many developers start advertising their star rating from March 2022.

If you are considering how the rating system will impact you or your business, if you are experiencing issues with your property or you are looking to buy an apartment, please do not hesitate to contact our team on 9523 5535.

Disclaimer: The information contained in this article is provided as general information only. It is not intended to be legal advice and it should not be used or relied on as legal or professional advice.