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Responding to this podcast.
Sue & Jimmy – You have picked out the highlights of a fascinating OCN Symposium.
You discuss ratings – one of the recommendations made in the NSW Strata Review as a ratings system so that buyers could compare off-the-plan purchases based on the developer”s rating. As you say, reputable developers will obtain a rating, and so will developers who need finance. But the rating system is voluntary, and developers who don’t wish to participate will continue to cut corners and phoenix. My suggestion is that developers should be required to have a rating , and state their rating in the Contract for Sale (in the Section 66ZM Statement).
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I’ve just been reminded that the ratings will be done independently by the credit ratings firm Equifax, not by Fair Trading.
Also, Fair Trading’s view clearly is that market pressure will be at least as effective as compulsion. Once all the good developers are rated, an unrated developer will be viewed the same as a developer who applied for a rating and failed. That should not only be a red flag to consumers but will attract additional scrutiny from the regulator.
As we heard at the seminar, having a rating could become a condition of bank lending and development approval. The developers will then be under a lot of pressure to apply for a rating, otherwise they are signalling that they are not up to scratch.
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