NSW government considering banning strata manager commissions to improve transparency and reduce costs
Consensus Summary
The NSW government is evaluating a proposal to ban commissions paid to strata managers, a move that could significantly reduce costs and improve transparency for apartment owners. The NSW Productivity and Equality Commissionâs report, led by Peter Achterstraat, found that commissionsâlegal but often hidden paymentsâcreate conflicts of interest, inflate expenses, and erode trust between owners and managers. Nearly a quarter of NSW residents live in strata properties, with Sydney expected to see half of its homes as strata dwellings by 2041, making the issue critical for housing affordability. The report recommends phasing out commissions over three years in favor of a fee-for-service model, estimating savings of over $300 million to $333 million for owners over 15 years through lower premiums and competitive pricing. While the NSW government has not yet committed to the reforms, the opposition has signaled openness to considering a ban if justified. Industry resistance remains, with some strata managers arguing commissions compensate them for complex work, though owner groups and peak bodies like the Strata Community Association support the change. Personal cases, such as Sydney apartment owner Lui Timbanoâs dispute over inflated insurance costs, illustrate the real-world impact of these commissions, while broader concerns include vertical integration and developer-selected managers creating further conflicts.
â Verified by 2+ sources
Key details reported by multiple sources:
- Peter Achterstraat is the head of the NSW Productivity and Equality Commission and led the report on strata commissions
- The NSW Productivity Commission report recommended phasing out commissions for strata managers in favor of a fee-for-service model
- Nearly a quarter (25%) of all NSW residents live in residential strata schemes, including apartments, townhouses, villas, and duplexes
- The report estimated that around half of all homes in Sydney will be strata dwellings by 2041
- The NSW government will carefully consider the commissionâs findings and recommendations, including potential impacts on owners, managers, and the industry
- More than 550 submissions were received during the consultation on strata commissions
- Strata managers can receive commissions for new contracts, including insurance policies and other services like energy and telecommunications
- The NSW Productivity Commission review found commissions could lead to conflicts of interest, poor practice, and vertical integration
- The report proposed a three-year transition period to phase out commissions, allowing the industry time to adapt
- The NSW Minister for Better Regulation and Trading is Anoulack Chanthivong
Points of Difference
Details reported by only one source:
- Strata managers are legally able to receive commissions for new contracts under current NSW law
- Commissions could be banned under a fee-for-service proposal that would make apartment living more affordable for millions of residents
- David Glover from the Owners Corporation Network Australia called commissions 'hidden payments' that create an incentive for managers to sign up to more expensive contracts
- The ABC mentioned a quote from Peter Achterstraat: 'They can also make it harder for owners to understand the cost involved and they can undermine the trust between owners and managers'
- The ABC highlighted that strata managers are appointed by owners' corporations to manage daily operations of apartment buildings
- The ABC reported that a standard strata insurance policy can attract 20% commissions, but this specific number was not repeated in other sources
- The Guardian reported that Peter Achterstraat said: 'The only place people can afford to buy these days is in an apartment. Thatâs why Iâm so keen to get this solved sooner rather than later'
- The Guardian included a case study of a large residential strata scheme in inner Sydney where the strata manager accepted insurance commissions at 15% of premiums, growing from $8,000 to $27,000 annually over four years despite no material change in work
- The Guardian mentioned that the peak body for the strata industry in NSW, the Strata Community Association, has backed a move away from commissions
- The Guardian highlighted that some strata managers argued commissions remunerated them for 'work that they consider to be important and resource-intensive'
- The Guardian reported that the reforms could generate more than $300 million in benefits for the state over the next 15 years
- The SMH reported that a standard strata insurance policy can attract 20% commissions, typically split between brokers and strata managers, with a $50,000 policy generating a $10,000 commission
- The SMH included a personal case study of Sydney apartment owner Lui Timbano, who alleged his strata manager exceeded agreed commission limits, with insurance costs dropping from $28,000 to $21,000 when an independent broker was consulted
- The SMH mentioned that commissions can account for 15 to 25% of some strata management firmsâ total revenue, in some cases representing their entire profit margin
- The SMH reported that 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 SMH highlighted that strata managers are often selected by developers before apartments are sold, creating conflicts of interest when addressing building defects
- The SMH noted that the Strata Community Association NSW last year announced that members would phase out insurance commissions
Contradictions
Conflicting information between sources:
- The ABC and Guardian both mention the 25% of NSW residents living in strata schemes, but the SMH does not provide this specific statistic
- The Guardian estimates the reforms could generate more than $300 million in benefits over 15 years, while the SMH estimates $333 million in benefits over the same period
- The ABC and Guardian both report that the NSW government has not yet committed to implementing the recommendations, but the SMH does not explicitly state this
- The Guardian and SMH both mention the Strata Community Association backing a move away from commissions, but the ABC does not mention this specific detail
- The ABC and SMH both mention that commissions can distort decision-making and leave owners paying more, but the Guardian does not explicitly state this in the same phrasing
Source Articles
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