NSW government considering banning commissions for strata managers to reduce costs and conflicts of interest
Consensus Summary
The NSW government is evaluating a proposal to ban commissions for strata managers, a move that could save apartment owners over $300 million over 15 years by reducing costs and conflicts of interest. The recommendation comes from a report by NSW Productivity Commissioner Peter Achterstraat, who found that commissions—often 15 to 20% of insurance premiums—create perverse incentives for managers to prioritize their own earnings over securing the best deals for owners. With nearly half of Sydney’s homes expected to be strata-titled by 2041 and over a million residents already living in such properties, the issue has gained urgency. While the Strata Community Association supports phasing out commissions, some managers resist change, arguing it threatens their business models. The NSW government has not yet decided on implementation but will consider the report’s four reform pathways, including a voluntary phase-out or a full legislative ban. Apartment owners and experts highlight concerns like opaque pricing, vertical integration of management firms with service providers, and difficulties in switching providers due to contractual clauses tied to commissions. Legal disputes, such as the case of Lui Timbano in the SMH, illustrate the real-world impact of these practices on residents’ finances and trust in strata management.
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Key details reported by multiple sources:
- NSW Productivity Commissioner Peter Achterstraat’s report recommends banning commissions for strata managers, proposing a fee-for-service model instead
- The report found that strata commissions can lead to conflicts of interest, poor practice, and inflated costs for apartment owners in NSW
- More than 550 submissions were received during the consultation on strata commissions, with many apartment owners expressing concerns about rising costs and lack of transparency
- By 2041, apartments are expected to make up nearly half of all homes in Greater Sydney, with around 1 million people currently living in strata apartments across NSW
- The NSW government has not yet committed to implementing the recommendations but will carefully consider them, including potential impacts on owners, managers, and the industry
- A NSW Productivity and Equality Commission report estimates that banning commissions could generate over $300 million in benefits for apartment owners over 15 years
- Strata managers can receive commissions of up to 20% on insurance premiums, with a $50,000 policy potentially generating a $10,000 commission
- The Strata Community Association NSW has backed a move away from commissions, with some members already phasing out insurance commissions
- The report highlights the issue of 'vertical integration,' where strata managers benefit financially from directing business to service providers they are connected to
Points of Difference
Details reported by only one source:
- Achterstraat warned Sydney could become 'the city with no grandchildren' due to population decline among people aged 30-40, citing a 2024 report
- A case study in the report showed a strata manager earning $27,000 annually in commissions from insurance premiums over four years despite no material change in work required
- The report found that some strata managers argue commissions remunerate them for 'important and resource-intensive' work, resisting change
- A resident submission described a repair quote from a maintenance company linked to the strata manager’s conglomerate, highlighting conflicts of interest
- A Sydney apartment owner, Lui Timbano, is pursuing legal action in the NSW Civil and Administrative Tribunal over alleged excessive commission limits, with insurance costs reduced by 30% after switching brokers
- Socio-legal researcher Nicole Johnston noted commissions can account for 15 to 25% of some strata management firms’ total revenue, sometimes representing their entire profit margin
- The report highlights that developers often select strata managers before apartments are sold, creating conflicts of interest when addressing building defects later
- Strata lawyer Allison Benson said some strata managers took 'high offence' at the suggestion of banning commissions, insisting it would ruin their business model
- The ABC report emphasizes that abolishing commissions would increase transparency, competition, and value for money for apartment owners and renters
- David Glover from the Owners Corporation Network Australia called commissions 'hidden payments' that incentivize strata managers to sign up to more expensive contracts
- The ABC notes that nearly a quarter of all NSW residents live in residential strata schemes, including apartments, townhouses, villas, and duplexes
Where the reporting differs
Details that conflict, or appear in only some outlets:
- The Guardian reports that some strata managers argue commissions remunerate them for 'important and resource-intensive' work, while the ABC and SMH focus on the negative impacts of commissions without mentioning this defense
- The Guardian mentions a specific case where a strata manager earned $27,000 annually in commissions over four years, but the SMH does not provide this exact figure or case study
- The ABC emphasizes the potential for increased transparency and competition as primary benefits of banning commissions, while the Guardian and SMH focus more on cost savings and conflict of interest resolution
- The Guardian highlights Achterstraat’s broader warning about Sydney becoming 'the city with no grandchildren,' which is not mentioned in the SMH or ABC articles
- The SMH details a specific legal dispute involving Lui Timbano and his strata manager, which is not referenced in the Guardian or ABC articles
Source Articles
Commissions for strata managers should be banned ‘sooner rather than later’, NSW productivity commissioner says
Peter Achterstraat says protections are essential as apartments increasingly become ‘the only place people can afford to buy’ Follow our Australia news live blog for latest updates Get our breaking news email , free app or daily news podcast The New South Wales productivity commissioner wants exorbitant commissions for strata managers banned “sooner rather than later”, with apartments expected to make up half of all Sydney homes by 2041. The NSW government is yet to commit to implementing the re
This idea would save apartment owners $333m. Strata managers took ‘high offence’
A system of payments that has inflated the cost of apartment living is facing an overhaul, as the NSW government considers a historic ban.
Commissions for strata managers could be banned under proposed model
The head of the NSW Productivity Commission says abolishing commissions for strata managers will increase fairness and transparency for apartment owners.
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