The New South Wales productivity commissioner wants exorbitant commissions for strata managers banned “sooner rather than later”, with apartments expected to make up half of all Sydney homes by 2041.
The NSW government is yet to commit to implementing the recommendations contained in Peter Achterstraat’s report. He has advised outlawing commissions on insurance premiums and other services.
Achterstraat said with a million people living in strata apartments across NSW, the protections were essential, especially given units were the only way many younger first-time buyers could enter the housing market.
“The only place people can afford to buy these days is in an apartment,” the commissioner told Guardian Australia. “That’s why I’m so keen to get this solved sooner rather than later … [before] we’ve got a much bigger issue.”
Sign up for the Breaking News Australia emailApartment owners hire a strata manager, often from a private company, who receives a fee for managing the affairs of the owners’ corporation.
The strata manager also typically receives commissions for securing insurance and other contracts, including energy and telecommunications, sometimes directly from the service provider.
The NSW productivity commission review found this could lead to significant conflicts of interest, poor practice, as well as a trend towards “vertical integration”, whereby strata managers benefit financially from directing business to service providers with whom they have a personal or business connection.
In one owner submission, a strata resident said a simple building repair had been quoted “by a very large maintenance company based on the other side of Sydney”.
“It turned out this company was part of the conglomerate that includes our ‘new’ strata management company,” they said.
The review into strata commissions received more than 550 submissions.
One case study was a large residential strata scheme in inner Sydney. The strata manager accepted insurance commissions at 15% of premiums. During a four-year period, which saw premiums grow rapidly, the commission payments grew from $8,000 to $27,000 a year despite “no material change in the work required”.
The strata committee decided to directly engage an insurance broker, which led to a reduction in premiums by 30%.
Achterstraat proposed an upfront, fee-for-service model, which would make NSW the first state or territory in Australia to ban commissions. The reforms could generate more than $300m in benefits for the state over the next 15 years, including through improved competition.
“A large number of strata managers are already moving off commission and moving into the direct fee model,” he said.
The peak body for the strata industry in NSW, the Strata Community Association, has backed a move away from commissions.
But the report found that some in the strata management industry were resistant to change, arguing the commissions remunerated managers “for work that they consider to be important and resource‑intensive”.
It acknowledged that the removal of commissions could increase fees to cover strata management costs, but said it expected this to be offset by reduced premiums and other costs.
Achterstraat recommended phasing out strata commissions over three years, allowing the industry time to transition. He provided four options for reform, including supporting the industry to voluntarily phase out commissions or to legislate an outright ban.
The NSW minister for fair trading, Anoulack Chanthivong, who commissioned the review, welcomed “the options it has put forward for reform”.
“The government will now carefully consider the commission’s findings and recommendations, including the potential impacts on owners, strata managers and the broader industry.”
The NSW opposition spokesperson for fair trading, Tim James, said it would consider any reform proposals put forward by the government “including a potential ban on commissions, noting that any such prohibition should have a compelling and comprehensive basis on which to ban”.
Achterstraat is the inaugural head of the NSW Productivity and Equality Commission, which was established in 2018. In 2024, he warned that Sydney was on track to become “the city with no grandchildren” after a report found it lost twice as many people aged from 30 to 40 as it gained between 2016 and 2021.
