NSW government considering banning strata manager commissions to reduce costs and conflicts of interest
Consensus Summary
New South Wales is debating a potential ban on commissions paid to strata managers, a contentious practice where managers earn fees for arranging services like insurance and energy contracts. The NSW Productivity Commissionâs report, led by Peter Achterstraat, found these commissionsâoften 15% to 20% of premiumsâcreate conflicts of interest, inflate costs for apartment owners, and erode trust. With over 1 million people living in strata properties and apartments projected to dominate Sydneyâs housing market by 2041, the commission estimates reforms could save owners $300m to $333m over 15 years through lower premiums and increased competition. While the NSW government has welcomed the report and will consider reforms, industry resistance persists, with some strata managers arguing commissions compensate for complex, resource-intensive work. Cases like a Sydney apartment owner suing his strata manager over inflated insurance costs highlight the real-world impact of these practices. The report proposes a phased transition to a fee-for-service model, with voluntary industry action or legislative bans as options, though critics emphasize the need for transparency and fair competition to protect ownersâ interests.
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Key details reported by multiple sources:
- NSW Productivity Commissioner Peter Achterstraatâs report recommends banning commissions for strata managers, proposing a fee-for-service model instead
- More than 550 submissions were received during the consultation on strata commissions, with strong backing from apartment owners for reform
- 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
- Achterstraatâs report estimates that phasing out commissions could generate over $300 million in benefits for NSW over 15 years through lower premiums and improved competition
- Strata managers currently receive commissions (e.g., 15% of insurance premiums) for services like insurance, energy, and telecommunications, creating conflicts of interest
- The NSW government, led by Minister Anoulack Chanthivong, will carefully consider the reportâs recommendations but has not yet committed to implementing them
- The Strata Community Association NSW has backed a move away from commissions, with some members already phasing out insurance commissions voluntarily
Points of Difference
Details reported by only one source:
- Achterstraat cited a case where a strata managerâs insurance commissions grew from $8,000 to $27,000 annually over four years despite no material change in work, leading to a 30% premium reduction after owners engaged an independent broker
- The report found âvertical integrationâ trends where strata managers benefit financially from directing business to affiliated service providers, including a case where a repair quote came from a company linked to the strata managerâs conglomerate
- Achterstraat warned that Sydney is on track to become âthe city with no grandchildrenâ due to population decline among 30-40-year-olds (2016â2021 data)
- The NSW opposition spokesperson for fair trading, Tim James, noted that any ban on commissions should have a âcompelling and comprehensive basisâ
- A standard strata insurance policy can attract 20% commissions, with a $50,000 policy generating $10,000 in commissions that inflate premiums for residents
- Sydney apartment owner Lui Timbano is suing his strata manager in the NSW Civil and Administrative Tribunal over alleged commission overcharges, with insurance costs reduced by $7,000 after switching brokers
- Nicole Johnston (socio-legal researcher) stated commissions can account for 15â25% of some strata management firmsâ revenue, sometimes representing their entire profit margin
- Allison Benson (strata lawyer) reported that strata managers took âhigh offenceâ at the suggestion of banning commissions, arguing it would disrupt their business model
- The report highlights that developers often appoint strata managers before sales, creating conflicts of interest if issues like building defects arise later
- Commissioner Achterstraat stated abolishing commissions would increase transparency, competition, and value for money for owners and renters
- David Glover (Owners Corporation Network Australia) called commissions âhidden paymentsâ that incentivize strata managers to prioritize expensive contracts over better deals
- The ABC noted that nearly a quarter of all NSW residents live in residential strata schemes (apartments, townhouses, villas, duplexes)
Contradictions
Conflicting information between sources:
- The Guardian reports Achterstraatâs estimate of $300m in benefits over 15 years, while the SMH cites $333m (a discrepancy of $33m)
- The Guardian mentions a 15% commission on insurance premiums in one case study, but the SMH states commissions can reach 20% for standard policies (no source confirms 15% as universal)
- The Guardian highlights Achterstraatâs warning about Sydney becoming âthe city with no grandchildren,â which is not mentioned in the SMH or ABC articles
- The SMH describes strata managers as taking âhigh offenceâ at reform proposals, while the ABC does not include this specific reaction from industry representatives
- The Guardian notes the Strata Community Association has backed reform but does not specify voluntary phasing-out details; the SMH explicitly states some members have already phased out insurance commissions
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