Commissions for strata managers could be banned under proposed model

Topic:Housing Policy

Commissions paid to strata managers could be banned in NSW under a fee-for-service proposal. (ABC Coffs Coast: Claire Simmonds)

In short:

The head of the NSW Productivity Commission says abolishing commissions for strata managers will increase fairness and transparency for apartment owners.

Strata managers are appointed by apartment owners' corporations to manage the daily operations of their buildings, with managers legally able to receive commissions for new contracts.

A Productivity and Equality Commission report found while these payments are legal, they can create a conflict of interest.

Commissions paid to strata managers could be banned in New South Wales under a proposal that would make apartment living more affordable for millions of residents.

A NSW Productivity and Equality Commission report recommended phasing out commissions in favour of a fee-for-service model which it says would increase fairness and transparency for apartment owners.

Productivity Commissioner Peter Achterstraat said the current commission-based model was legal but created a conflict of interest which increased costs for owners.

"They can also make it harder for owners to understand the cost involved and they can undermine the trust between owners and managers," he said.

Strata managers are appointed by owners' corporations to manage the daily operations of their apartment building. (Four Corners: Rob Hill)

"Abolishing commissions can do three things: it can increase transparency, it can increase competition and it can increase the value of money to owners and hopefully that'll be passed on to renters of strata apartments."

Strata managers are appointed by owners' corporations to manage the daily operations of their apartment building, and these managers can receive commissions for new contracts or insurance products.

Mr Achterstraat said removing these commissions would likely result in lower premiums and lower strata fees for apartment owners.

"If we can make it more transparent then there'll be a greater incentive for competition and there'll be a greater relationship between owners and managers.

"When owners can clearly see what they're paying for and why they're paying for it, then there's better value for money and there's a better relationship between the owners and the strata managers."

Recommendation welcomed

The report found nearly a quarter of all NSW residents live in residential strata schemes — including apartments, townhouses, villas and duplexes.

It estimated around half of all homes in Sydney will be strata dwellings by 2041.

Nearly a quarter of NSW residents live in strata schemes, including apartments, townhouses and duplexes. (ABC News: Keana Naughton)

David Glover from the Owners Corporation Network Australia backed the commission's recommendation and called for more transparency between owners and strata managers.

"They need to be able to trust those managers, those managers need to be professionals," he said.

Mr Glover said commissions amounted to "hidden payments" that created an incentive for strata managers to sign up to more expensive contracts or services, rather than shopping around for the best deal for owner's corporations.

"They [owners corporations] don't know what they're paying their strata managers," he said.

"They think they're paying them a certain amount but the strata managers are getting other income from elsewhere — ultimately all of this money comes out of owners' pockets.

"It makes it very difficult to compare strata managers when you're looking at whether you're getting value or not because you don't really know how much they're taking from you."

NSW Minister for Better Regulation and Trading Anoulack Chanthivong said the government would now carefully consider the commission's findings and recommendations.