NSW government considering banning strata manager commissions to improve transparency and affordability
Consensus Summary
The NSW government is evaluating a proposal to ban commissions paid to strata managers, a move that could save apartment owners hundreds of millions of dollars over 15 years by increasing transparency and competition. The NSW Productivity and Equality Commissionâs report, led by Peter Achterstraat, found that commissionsâoften 15 to 20 percent of insurance premiums or other service contractsâcreate conflicts of interest, distort decision-making, and inflate costs for residents. With nearly a quarter of NSW residents living in strata properties and Sydney expected to see half of its homes as strata dwellings by 2041, the issue is particularly pressing for younger first-time buyers who rely on apartments for affordability. The report, backed by over 550 submissions and supported by the Strata Community Association, recommends phasing out commissions over three years in favor of a fee-for-service model, estimating potential savings of $300 million to $333 million. While some strata managers and industry groups resist the change, arguing it could increase fees, othersâincluding apartment owners like Lui Timbanoâhave faced legal disputes and financial losses due to opaque commission structures. The NSW government has signaled it will carefully consider the recommendations, though no immediate action has been announced.
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Key details reported by multiple sources:
- Peter Achterstraat is the head of the NSW Productivity and Equality Commission and led the report recommending changes to strata manager commissions
- The NSW Productivity Commission report received over 550 submissions from apartment owners and industry stakeholders
- Nearly a quarter (25%) of NSW residents live in residential strata schemes, including apartments, townhouses, villas, and duplexes
- By 2041, around half of all homes in Sydney are expected to be strata dwellings
- Strata managers can legally receive commissions for new contracts, including insurance policies and other services, creating a conflict of interest
- The NSW government has commissioned the review and will carefully consider the recommendations, including potential impacts on owners, managers, and the industry
- The report recommends phasing out commissions in favor of a fee-for-service model over three years
- The Strata Community Association NSW has backed a move away from commissions, with some members already phasing out insurance commissions
- A NSW Minister for Better Regulation and Trading, Anoulack Chanthivong, has acknowledged the commissionâs findings and will consider the recommendations
- A 15% commission on insurance premiums was cited in one case study, with payments growing from $8,000 to $27,000 annually over four years despite no material change in work
Points of Difference
Details reported by only one source:
- The ABC reported that a Four Corners segment (Rob Hill) covered the issue, highlighting the conflict of interest and lack of transparency
- ABC mentioned that strata managers can receive commissions for new contracts or insurance products, with Peter Achterstraat stating this creates a conflict of interest
- ABC included a quote from David Glover of the Owners Corporation Network Australia, who called commissions 'hidden payments' that create incentives for managers to sign up to more expensive contracts
- ABC noted that strata managers are appointed by owners' corporations to manage daily operations of apartment buildings, with commissions legal but problematic
- The Guardian highlighted a case study where a strata manager accepted 15% commissions on insurance premiums, with payments growing from $8,000 to $27,000 annually over four years
- The Guardian included a quote from Peter Achterstraat stating that apartments are the only affordable option for many younger first-time buyers, emphasizing the urgency of reform
- The Guardian mentioned that some strata managers are resistant to change, arguing commissions remunerate them for 'important and resource-intensive' work
- The Guardian reported that the NSW opposition spokesperson for fair trading, Tim James, said the opposition would consider any reform proposals, including a potential ban on commissions
- The SMH reported that a standard strata insurance policy can attract 20% commissions, with a $50,000 policy generating a $10,000 commission
- The SMH included a case study of Sydney apartment owner Lui Timbano, who alleged his strata manager exceeded agreed commission limits, with insurance costs reduced by $7,000 through an independent broker
- The SMH noted that some strata managers took 'high offence' at the suggestion of banning commissions, with one lawyer (Allison Benson) reporting resistance at a meeting
- The SMH highlighted that strata managers are often appointed by developers before apartments are sold, creating conflicts of interest when addressing building defects
- The SMH mentioned that commissions can account for 15 to 25% of some strata management firmsâ total revenue, representing their entire profit margin in some cases
Contradictions
Conflicting information between sources:
- The Guardian and SMH both report that some strata managers are resistant to reform, but the Guardian emphasizes urgency due to affordability for first-time buyers, while the SMH focuses on industry pushback and legal disputes
- The ABC and SMH both mention that commissions are legal but problematic, but the SMH provides specific examples of commissions being 15-25% of firmsâ revenue, while the ABC does not quantify this
- The Guardian and SMH both cite case studies of commissions growing significantly over time, but the Guardianâs case study shows commissions growing from $8,000 to $27,000, while the SMH does not provide a similar specific figure for comparison
- The ABC and SMH both report that the NSW government will carefully consider the recommendations, but the SMH includes a quote from Fair Trading Minister Anoulack Chanthivong emphasizing the need for remuneration to align with ownersâ interests, while the ABC does not include this specific phrasing
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