NSW government considering banning strata manager commissions to cut apartment costs
Consensus Summary
NSW’s Productivity and Equality Commission is pushing to ban commissions paid to strata managers—a contentious practice where managers earn fees for arranging insurance, energy, and other contracts alongside their base service charges. The report, backed by over 550 submissions from apartment owners, warns these commissions create perverse incentives, inflate costs (e.g., a $50,000 insurance policy could generate $10,000 in commissions), and erode trust. With nearly half of Sydney’s homes expected to be strata-titled by 2041, the reforms could save owners $333 million over 15 years while increasing transparency. While industry groups like the Strata Community Association are phasing out commissions voluntarily, some managers resist change, arguing it threatens their revenue model. The NSW government has signaled cautious support, with Minister Anoulack Chanthivong stating they will ‘carefully consider’ the recommendations, though no immediate ban is planned. Critics argue the current system allows ‘vertical integration’—where managers profit from tied service providers—and hidden payments that owners cannot easily audit, while supporters emphasize the need for a fee-for-service model to restore fairness in a sector critical to Sydney’s housing future.
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Key details reported by multiple sources:
- NSW Productivity Commissioner Peter Achterstraat’s report recommends banning commissions for strata managers, citing conflicts of interest and inflated costs
- The report estimates scrapping commissions could save apartment owners $333 million over 15 years in NSW
- More than 1 million people live in strata properties across NSW, with nearly half of Greater Sydney’s homes expected to be strata-titled by 2041
- Strata managers currently receive commissions (e.g., 20% on insurance policies) from services like insurance, energy, and telecommunications, often split with brokers
- A NSW Productivity and Equality Commission report received over 550 submissions, with strong support for reform from apartment owners
- The report highlights ‘vertical integration’—where strata managers are linked to service providers they recommend—as a structural conflict of interest
- The Strata Community Association NSW has announced members will phase out insurance commissions as part of transparency reforms
- NSW Fair Trading Minister Anoulack Chanthivong stated the government would ‘carefully consider’ the report’s recommendations
- A case study in the report showed a strata manager’s insurance commissions grew from $8,000 to $27,000 annually over four years despite no change in work required
- Apartment owner Lui Timbano alleged his strata manager exceeded agreed commission limits, leading to overpayments of $7,000 annually on insurance
Points of Difference
Details reported by only one source:
- Strata managers’ commissions can account for 15 to 25% of some firms’ total revenue, in some cases representing their entire profit margin
- A $50,000 insurance policy could generate a $10,000 commission (20%) for strata managers, contributing to higher premiums
- Strata lawyer Allison Benson noted some managers took ‘high offence’ at the suggestion of banning commissions, calling it a threat to their business model
- Developer-selected strata managers may have conflicts of interest when addressing building defects, as they may owe loyalty to the original developer
- Lui Timbano’s strata manager’s contract included a ‘lost commission’ clause, penalizing the building if they switched providers, creating a ‘catch-22’ situation
- Peter Achterstraat emphasized the urgency of reform, stating apartments are the ‘only way many younger first-time buyers can enter the housing market’
- A resident submission described a repair quote from a maintenance company linked to their strata manager’s conglomerate, highlighting vertical integration
- Achterstraat proposed a three-year transition period for phasing out commissions, allowing the industry to adapt
- The NSW opposition spokesperson for fair trading, Tim James, stated they would consider reform proposals ‘including a potential ban on commissions’
- David Glover from Owners Corporation Network Australia called commissions ‘hidden payments’ that distort value comparisons between strata managers
- The ABC highlighted that strata managers’ commissions make it difficult for owners to understand total costs, as fees and commissions are often opaque
- The ABC emphasized that removing commissions would increase transparency and competition, benefiting both owners and renters
Contradictions
Conflicting information between sources:
- The Guardian states Achterstraat wants commissions banned ‘sooner rather than later,’ while the SMH notes the government is only ‘carefully considering’ the recommendations without immediate action
- The ABC implies the opposition has not yet taken a definitive stance on banning commissions, whereas the Guardian explicitly mentions opposition spokesperson Tim James would consider a ban
- The SMH reports some strata managers insist commissions are necessary for ‘important and resource-intensive work,’ while the Guardian frames commissions as purely conflict-driven and unnecessary
Source Articles
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