NSW government considering banning strata manager commissions to improve transparency and affordability
Consensus Summary
New South Wales is debating a potential ban on commissions paid to strata managers, a long-standing practice that critics say inflates costs and creates conflicts of interest for apartment owners. The NSW Productivity Commissionâs report, backed by over 550 submissions, found that commissionsâoften 15% to 25% of firmsâ revenueâdistort decision-making and erode trust, with insurance commissions alone potentially adding 20% to premiums. For example, a $50,000 policy could generate $10,000 in commissions, ultimately raising costs for residents. The commission estimates banning commissions could save apartment owners $333 million over 15 years through lower fees and premiums, while increasing transparency and competition. With nearly a quarter of NSW residents living in strata properties and Sydneyâs strata population projected to reach 50% by 2041, the reform could reshape apartment living. While some strata managers and industry groups resist the change, arguing it threatens their business models, othersâincluding the Strata Community Associationâhave voluntarily phased out commissions. The NSW government, led by Minister Anoulack Chanthivong, is reviewing the recommendations carefully, though no immediate action has been announced. Opposition support is conditional on a 'compelling basis' for a ban, reflecting ongoing debate over balancing industry concerns with owner protections.
â Verified by 2+ sources
Key details reported by multiple sources:
- Peter Achterstraat, NSW Productivity Commissioner, recommended phasing out commissions for strata managers in favor of a fee-for-service model to increase fairness and transparency for apartment owners
- Nearly a quarter (25%) of NSW residents live in residential strata schemes, including apartments, townhouses, villas, and duplexes, with Sydneyâs strata dwellings expected to reach 50% of homes by 2041
- The NSW Productivity Commission report received over 550 submissions, with strong backing from apartment owners for reform due to concerns over rising costs and conflicts of interest
- Commissions for strata managers can amount to 15% to 25% of some firmsâ total revenue, with insurance commissions alone potentially reaching 20% of premiums (e.g., a $50,000 policy generating $10,000 in commissions)
- The NSW government, led by Minister Anoulack Chanthivong, will carefully consider the commissionâs recommendations, including potential legislative bans on commissions
- Strata managers are legally appointed by ownersâ corporations to manage daily operations of apartment buildings and can receive commissions for new contracts or insurance products
Points of Difference
Details reported by only one source:
- Strata managers are appointed by owners' corporations to manage daily operations of apartment buildings, with commissions legally allowed but creating conflict of interest (quote: 'They can also make it harder for owners to understand the cost involved')
- David Glover from Owners Corporation Network Australia called commissions 'hidden payments' that create incentives for managers to sign up to more expensive contracts, undermining trust and value for money
- The ABC highlighted a Four Corners segment (Rob Hill) discussing how abolishing commissions could increase transparency, competition, and value for owners, potentially lowering strata fees and premiums
- The SMH reported that a $50,000 insurance policy could generate a $10,000 commission, with 20% commissions typically split between brokers and strata managers
- Sydney apartment owner Lui Timbano pursued legal action in the NSW Civil and Administrative Tribunal, alleging his strata manager exceeded agreed commission limits, with insurance costs dropping from $28,000 to $21,000 annually after switching brokers
- Strata lawyer Allison Benson noted that some strata managers took 'high offence' at the suggestion of banning commissions, insisting it would ruin their business model
- The SMH detailed 'vertical integration' concerns, where strata management companies are owned by or linked to service providers they recommend, with disclosure rules found insufficient to mitigate conflicts of interest
- The Strata Community Association NSW announced members would phase out insurance commissions, describing it as a step toward greater transparency
- The Guardian quoted Peter Achterstraat emphasizing the urgency of reform, stating apartments are the 'only place people can afford to buy these days,' particularly for younger first-time buyers
- A case study in the Guardian highlighted a large inner-Sydney strata scheme where insurance commissions grew from $8,000 to $27,000 annually over four years despite no material change in work, with premiums later reduced by 30% after direct broker engagement
- The Guardian mentioned the NSW opposition spokesperson for fair trading, Tim James, would consider reform proposals, including a potential ban on commissions, but noted it should have a 'compelling and comprehensive basis'
Contradictions
Conflicting information between sources:
- The ABC and Guardian both report that commissions can create conflicts of interest, but the SMH specifically states that some strata managers argue commissions remunerate them for 'important and resource-intensive work'
- The Guardian highlights that some strata managers are already moving to fee-for-service models, while the SMH reports that industry resistance remains strong, with some managers taking 'high offence' at the reform suggestion
- The ABC and Guardian both emphasize the urgency of reform due to rising strata costs and conflicts of interest, but the SMH focuses more on the legal and administrative burdens faced by individual owners navigating disputes (e.g., Timbanoâs case)
- The Guardian quotes Achterstraat as urging reform 'sooner rather than later,' while the ABC and SMH frame the governmentâs response as a cautious consideration of recommendations without immediate commitment
- The SMH reports that vertical integration (strata managers linked to service providers) is a growing concern, but the ABC does not explicitly mention this issue
Source Articles
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....
This idea would save apartment owners $333m. Strata managers took âhigh offenceâ
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 should be banned âsooner rather than laterâ, NSW productivity commissioner says
Peter Achterstraat says protections are essential as apartments increasingly become âthe only place people can afford to buyâ Follow our Australia news live blog for latest updates Get our breaking ne...