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Commissions and other financial benefits received by strata managers have been under the spotlight in recent years. While strata managers and agents owe their clients, the owners corporation, a fiduciary duty to act in their best interests, it is not uncommon for strata managers and agents to receive commissions from a range of third parties including insurers and service providers, leading to potential conflicts of interest.

A significant portion of residents in NSW reside in strata dwellings. According to the NSW Productivity and Equality Commission (the Commission), it is projected that by 2041, nearly half of all homes in Sydney will be strata dwellings.

Strata managers play an important role in the day-to-day management of strata dwellings. The Commission recognised that owners may find it hard to comprehend how commissions can affect the quality and the cost of services they receive.

In June last year, the Commission was asked by the Minister for Better Regulation and Fair Trading to examine the market impacts of prohibiting strata managing agents from receiving commissions. The terms of reference noted that commissions can create conflicts of interest and a “perverse incentive” for strata managers or agents to favour products and services that benefit themselves instead of those in the owners corporations best interests.

In its final report, the Commission outlines four options on how the conflict of interest issue can be addressed and how the NSW Government can play a role. The options are as follows:

  1. supports industry to phase out insurance commissions for strata managers
  2. prohibits strata managers in NSW from accepting any commissions
  3. prohibits strata managers from accepting any commissions, and restricts intermediary commissions
  4. prohibits strata managers from accepting percentage-based commissions but permits a regulated flat-fee payment.

The options share the same goal: to better align the economic incentives of strata managers with the interests of owners corporations and owners, improve transparency of any financial payments received by strata managers, and protect strata owners as ‘consumers.’

There are over 400 strata management businesses in NSW. 37 of those businesses manage a total 5,000 or more lots each, while 142 manage a total of less than 100 lots each. The report found that eliminating commissions could create more than $300 million in benefits for NSW over the next 15 years.

NSW Productivity and Equality Commissioner Peter Achterstraat AM stated that, “While commissions provide remuneration to strata managers for their role in procuring and managing strata services, they can create incentives that do not align with the best interests of owners and renters”.

He said the Commission “recognises that this report follows earlier reforms in 2025 to strata laws that improved transparency and accountability”.

“The four options on how to end strata managers’ commissions in our report will deliver economic benefits and further improve transparency and the function of this growing sector,” he said.