NSW government considering banning strata manager commissions to improve transparency and affordability
Consensus Summary
The core story involves the NSW government evaluating a proposal to ban commissions for strata managers, a practice where managers earn additional income from arranging insurance and other contracts for apartment buildings. The NSW Productivity and Equality Commissionâs report found commissions create conflicts of interest, inflate costs, and erode trust between owners and managers, with estimates suggesting $333 million in savings for apartment owners over 15 years. Nearly a quarter of NSW residents live in strata properties, and Sydneyâs reliance on apartments is projected to double by 2041. The report received over 550 submissions, with strong support from owners for reform, while some strata managers and industry representatives have expressed resistance. The government has not yet committed to a ban but will carefully consider the recommendations, including potential impacts on owners, managers, and the broader industry. Key concerns include vertical integration, where managers benefit from ties to service providers, and the difficulty of comparing managers due to opaque pricing structures.
â Verified by 2+ sources
Key details reported by multiple sources:
- NSW Productivity Commissioner Peter Achterstraat 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 Sydney expected to have half (50%) of homes as strata dwellings by 2041
- The NSW Productivity and Equality Commission report found commissions create a conflict of interest, inflating costs for owners and undermining trust between owners and managers
- The report estimates banning commissions could save apartment owners $333 million over 15 years through lower premiums and more competitive pricing
- Strata managers can receive commissions of up to 20% on insurance policies, with a $50,000 policy generating a $10,000 commission that ultimately increases premiums for residents
- Over 550 submissions were received during consultation on the commissionâs report, with strong backing from apartment owners for reform
- The NSW governmentâs Fair Trading Minister Anoulack Chanthivong stated the government would carefully consider the commissionâs findings and recommendations
Points of Difference
Details reported by only one source:
- Strata managers are legally able to receive commissions for new contracts, including insurance products, under current NSW law
- David Glover from the Owners Corporation Network Australia called commissions âhidden paymentsâ that create an incentive for managers to sign up to more expensive contracts
- The ABC mentioned a Four Corners segment (Rob Hill) discussing the issue, though no specific details from the segment were repeated in other sources
- ABC highlighted that strata managers are appointed by ownersâ corporations to manage daily operations of apartment buildings
- A Sydney apartment owner, Lui Timbano, is pursuing legal action in the NSW Civil and Administrative Tribunal alleging his strata manager exceeded agreed commission limits, with insurance costs reduced from $28,000 to $21,000 by an independent broker
- Strata lawyer Allison Benson noted some strata managers took âhigh offenceâ 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 closely linked to service providers they recommend, with existing disclosure rules deemed insufficient
- The SMH mentioned a case where a strata managerâs commissions grew from $8,000 to $27,000 annually over four years despite no material change in work required
- Peter Achterstraat explicitly stated commissions should be banned âsooner rather than laterâ due to the growing reliance on apartments for first-time buyers
- The Guardian included a case study of a large inner-Sydney strata scheme where insurance commissions grew from 15% of premiums to unsustainable levels, leading to a 30% reduction in premiums after direct broker engagement
- The Guardian highlighted that some strata managers argue commissions remunerate them for âimportant and resource-intensive workâ and that removal could increase fees
- The Guardian mentioned the NSW opposition spokesperson for fair trading, Tim James, would consider reform proposals, including a potential ban, but noted it should have a âcompelling and comprehensive basisâ
Contradictions
Conflicting information between sources:
- The Guardian states commissions should be banned âsooner rather than laterâ while ABC and SMH describe the government as âcarefully consideringâ the recommendations without committing to a ban
- The Guardian reports that some strata managers argue commissions remunerate them for âimportant and resource-intensive workâ but ABC and SMH focus on the conflicts of interest and lack of transparency created by commissions
- The Guardian mentions a 30% reduction in premiums after direct broker engagement in one case, while ABC and SMH do not provide specific percentage savings in their examples
- SMH reports that some strata managers took âhigh offenceâ at the suggestion of banning commissions, but ABC and Guardian do not explicitly mention this level of industry resistance
- The Guardian highlights that strata managers could face increased fees if commissions are removed, while ABC and SMH emphasize the potential for lower premiums and better value for money
Source Articles
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