NSW government considering banning strata manager commissions to cut apartment costs
Consensus Summary
The NSW government is evaluating a proposal to ban commissions paid to strata managers, a move that could save apartment owners $333 million over 15 years by reducing inflated costs and conflicts of interest. The recommendation comes from a Productivity and Equality Commission report, which found commissionsâoften 20% of insurance premiumsâcreate perverse incentives for managers to prioritize their earnings over owner savings. Over 550 submissions backed reform, with cases showing commissions rising despite unchanged work, and vertical integration linking managers to service providers. While the Strata Community Association supports phasing out commissions, some managers resist, fearing financial disruption. The government is considering four reform pathways, including a full legislative ban, with opposition parties also weighing in. Nearly half of Sydneyâs homes are projected to be strata-titled by 2041, making the issue critical for affordability and transparency in apartment living.
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Key details reported by multiple sources:
- NSW Productivity Commissioner Peter Achterstraatâs 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
- Over 550 submissions were received during consultation on the report, with strong support from apartment owners for reform
- Strata managers in NSW can receive commissions of up to 20% on insurance policies, with a $50,000 policy generating a $10,000 commission split between brokers and managers
- The Strata Community Association NSW has announced it will phase out insurance commissions for its members
- Nearly 1 million people live in strata properties across NSW, with projections that nearly half of all homes in Greater Sydney will be strata-titled by 2041
- The NSW governmentâs Fair Trading Minister Anoulack Chanthivong stated the government would âcarefully considerâ the recommendations
- A case study in the report showed a strata managerâs insurance commissions grew from $8,000 to $27,000 annually over four years despite no change in work required
- The report highlights âvertical integrationâ where strata managers are linked to service providers they recommend, creating conflicts of interest
Points of Difference
Details reported by only one source:
- Strata manager Allison Benson said some managers took âhigh offenceâ at the suggestion of banning commissions, insisting it would ruin their business model
- 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 by $7,000 after switching brokers
- Timbano described navigating the dispute as requiring him to âtrawl through email records and prepare legal submissions and affidavitsâ
- Nicole Johnston, a socio-legal researcher, noted commissions can account for 15 to 25% of some strata management firmsâ total revenue, in some cases representing their entire profit margin
- The report mentions developers often select strata managers before apartments are sold, creating conflicts of interest when addressing building defects
- Peter Achterstraat stated the issue needed to be solved âsooner rather than laterâ due to apartments being the only affordable housing option for younger first-time buyers
- A resident submission described a repair quote from a maintenance company linked to the strata managerâs conglomerate, highlighting vertical integration concerns
- The Guardian quoted Achterstraat saying âa large number of strata managers are already moving off commission and moving into the direct fee modelâ
- The opposition spokesperson for fair trading, Tim James, said any potential ban on commissions should have a âcompelling and comprehensive basisâ
- The ABC included a quote from David Glover of the Owners Corporation Network Australia calling commissions âhidden paymentsâ that make it difficult for owners to compare value
- Glover stated owners âdonât know what theyâre paying their strata managersâ and that all money ultimately comes out of ownersâ pockets
- The ABC emphasized the reportâs recommendation to increase transparency and competition through a fee-for-service model
Contradictions
Conflicting information between sources:
- The Guardian reports Achterstraat saying âa large number of strata managers are already moving off commission,â while the SMH does not mention this widespread shift
- The ABC highlights that owners âdonât know what theyâre paying their strata managers,â but the SMH does not explicitly state this as a widespread issue
- The Guardian quotes Achterstraat calling apartments the âonly way many younger first-time buyers can enter the housing market,â while the SMH does not emphasize this demographic urgency
- The SMH reports some strata managers âtook high offenceâ at reform proposals, but the Guardian does not include this specific reaction
- The ABC focuses on the need for transparency and competition, while the SMH emphasizes the legal and financial burden on owners navigating disputes
Source Articles
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