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, backed by over 550 submissions, argues these commissions create conflicts of interest, inflate costs, and erode trust, with estimates suggesting reforms could save apartment owners over $300 million in 15 years. Commissioner Peter Achterstraat proposes replacing commissions with a transparent fee-for-service model, noting that by 2041, half of Sydneyâs homes will be strata apartments, making the issue critical for affordability. While the Strata Community Association supports phasing out commissions and some firms have already voluntarily reduced them, industry resistance remains, with managers arguing commissions compensate for complex work. Apartment owners like Lui Timbano have faced disputes over hidden commissions, with insurance costs dropping by 30% after switching brokers, illustrating the financial impact. The NSW government is reviewing the recommendations, with ministers emphasizing careful consideration of impacts on owners, managers, and the broader industry.
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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 Sydney homes, with around 1 million people currently living in strata apartments across NSW
- Achterstraatâs report estimates banning 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 Strata Community Association NSW has backed a move away from commissions, with some members already phasing out insurance commissions
- NSW Minister Anoulack Chanthivong has stated the government will carefully consider the commissionâs recommendations, including potential impacts on owners and managers
- A case study in the report showed a strata manager earning $27,000 annually in commissions from insurance premiums (up from $8,000) despite no material change in work required
- Apartment owner Lui Timbano (SMH) alleges his strata manager exceeded agreed commission limits, with insurance costs reduced by 30% after switching to an independent broker
- The NSW government has not yet committed to implementing the recommendations, with opposition spokesperson Tim James noting any ban would require a compelling basis
Points of Difference
Details reported by only one source:
- Achterstraat warned Sydney could become âthe city with no grandchildrenâ due to population decline among 30-40-year-olds (2016-2021)
- The report found âvertical integrationâ trends where strata managers benefit financially from directing business to affiliated service providers
- A resident submission described a repair quote from a maintenance company linked to the strata managerâs conglomerate
- The NSW opposition spokesperson Tim James explicitly stated he would consider a ban on commissions âincluding a potential banâ but noted it would need a âcompelling and comprehensive basisâ
- NSW Treasury director Tom Carr noted a $50,000 insurance policy could generate a $10,000 commission (20% split between brokers and managers)
- Apartment owner Lui Timbano is pursuing legal action in the NSW Civil and Administrative Tribunal over alleged commission overreach, with insurance costs reduced by $7,000 annually after switching brokers
- Strata lawyer Allison Benson reported some strata managers took âhigh offenceâ at the suggestion of banning commissions, insisting it would ruin their business model
- Benson highlighted that developers often appoint strata managers before sales, creating conflicts of interest if issues like building defects arise
- The report recommends restricting insurance brokers from accepting commissions for strata-related work and increasing monitoring/compliance checks
- Commissioner Achterstraat stated abolishing commissions would âincrease transparency, increase competition, and increase the value of money to ownersâ
- David Glover from Owners Corporation Network Australia called commissions âhidden paymentsâ that incentivize managers to choose expensive contracts
- Glover noted owners âdonât know what theyâre paying their strata managersâ and commissions make it difficult to compare value for money
- The ABC emphasized that strata managers are appointed by ownersâ corporations to manage daily operations, with commissions legally allowed for new contracts
Contradictions
Conflicting information between sources:
- The Guardian reports Achterstraatâs warning about Sydney becoming âthe city with no grandchildrenâ (2024), but this detail is not mentioned in SMH or ABC
- The Guardian states the NSW government is âyet to commitâ to implementing the recommendations, while SMH and ABC both describe the government as âcarefully consideringâ the report without implying a definitive commitment
- The ABC implies the fee-for-service model would âincrease fairness and transparency for apartment ownersâ without quantifying the impact, while the Guardian and SMH provide specific financial estimates ($300m+ benefits)
- The SMH quotes a 20% commission rate on insurance policies (e.g., $10,000 on a $50,000 policy) from NSW Treasury, but the Guardian and ABC do not specify this exact percentage in their reporting
- The Guardian highlights a 15% commission on insurance premiums in a case study, while the SMH does not reference this specific percentage but focuses on broader commission ranges (15-25% of revenue for some firms)
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