NSW government considering banning strata manager commissions to improve transparency and affordability
Consensus Summary
The core story involves the NSW government considering a ban on commissions paid to strata managers, a proposal backed by the NSW Productivity and Equality Commission. The report, led by Commissioner Peter Achterstraat, argues that these commissions create conflicts of interest, inflate costs, and reduce transparency for apartment owners, who make up a significant portion of NSW residents and are projected to dominate Sydneyâs housing market by 2041. Over 550 submissions supported reform, with estimates suggesting $300 million in savings over 15 years through lower premiums and increased competition. While the Strata Community Association has backed phasing out commissions, some industry members resist change, citing reliance on commissions for revenue. The government is reviewing the recommendations, with no immediate commitment to implementation. Case studies, including a Sydney apartment ownerâs legal dispute over inflated insurance costs, illustrate the real-world impact of these practices, with commissions sometimes reaching 20% of premiums and contributing to opaque pricing structures.
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Key details reported by multiple sources:
- Peter Achterstraat is the head of the NSW Productivity and Equality Commission and led the report recommending changes to strata manager commissions
- The NSW Productivity Commission report found that nearly a quarter (25%) of all NSW residents live in residential strata schemes, including apartments, townhouses, villas, and duplexes
- The report estimates that around half of all homes in Sydney will be strata dwellings by 2041
- The commission received over 550 submissions during its review of strata commissions
- The NSW government has not yet committed to implementing the recommendations but will carefully consider them, according to Minister Anoulack Chanthivong
- Strata managers currently receive commissions for new contracts, including insurance policies and other services, which can create conflicts of interest
- The commission recommends phasing out commissions in favor of a fee-for-service model to increase transparency and competition
- The report estimates that banning commissions could generate over $300 million in benefits for NSW over the next 15 years through lower premiums and improved competition
- The Strata Community Association NSW has backed a move away from commissions, with some members already phasing out insurance commissions
- A NSW Treasury director (Tom Carr) noted that a standard strata insurance policy can attract 20% commissions, with a $50,000 policy generating $10,000 in commissions
Points of Difference
Details reported by only one source:
- The ABC reported that the commission-based model is legal but creates a conflict of interest that increases costs for owners, with quotes from Commissioner Peter Achterstraat emphasizing transparency and competition benefits
- ABC included a specific quote from David Glover of the Owners Corporation Network Australia calling commissions 'hidden payments' that create incentives for managers to sign up to more expensive contracts
- ABC mentioned a Four Corners reference to Rob Hill in the context of strata managers' operations
- ABC highlighted that strata managers are appointed by owners' corporations to manage daily operations of apartment buildings, with commissions for new contracts or insurance products
- The Guardian included a direct quote from Commissioner Achterstraat stating he wants commissions banned 'sooner rather than later' due to the growing reliance on apartments for first-time buyers
- The Guardian provided a case study of a large residential strata scheme in inner Sydney where insurance commissions grew from $8,000 to $27,000 annually over four years despite no material change in work required
- The Guardian mentioned that some strata managers are already moving off commission and into a direct fee model, with the report suggesting this trend is growing
- The Guardian noted that the Strata Community Association has backed a move away from commissions, but some industry members are resistant to change, arguing commissions remunerate important work
- The SMH reported that 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
- The SMH included a quote from strata lawyer Allison Benson stating that some strata managers took 'high offence' at the suggestion of banning commissions, insisting it would ruin their business model
- The SMH detailed that commissions can account for 15 to 25% of some strata management firmsâ total revenue, in some cases representing their entire profit margin
- The SMH highlighted the issue of 'vertical integration,' where strata management companies are owned by or closely linked to service providers they recommend, with disclosure rules found insufficient to mitigate conflicts of interest
- The SMH mentioned that developers often select a strata manager before apartments are sold, creating conflicts of interest when managing building defects
Contradictions
Conflicting information between sources:
- ABC and SMH both mention that commissions are legal but create conflicts of interest, but the Guardian emphasizes that the commissions are described as 'exorbitant' without this legal distinction being highlighted
- The Guardian states that the NSW government is 'yet to commit' to implementing the recommendations, while ABC and SMH both report that Minister Anoulack Chanthivong has said the government will 'carefully consider' the findings but does not explicitly commit to implementation
- The Guardian reports that some strata managers are already moving off commission, while the SMH notes that some managers have taken 'high offence' at the suggestion of banning commissions, implying resistance rather than voluntary transition
- The ABC and Guardian both mention that the commission recommends phasing out commissions over three years, but the SMH does not explicitly state this timeline, focusing more on immediate resistance from the industry
- The Guardian and SMH both highlight the issue of vertical integration, but the SMH provides more specific examples of how this creates conflicts of interest, including the case of a strata manager linked to a maintenance company for repairs
Source Articles
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