NSW Eyes Ban on Strata Commission Payments

New South Wales is weighing a significant overhaul of how strata managing agents are paid, following a recommendation to prohibit commission-based income tied to insurance and other contracted services.

The proposal, put forward by NSW Productivity Commissioner Peter Achterstraat, would push the sector toward a fee-for-service approach as the state government assesses a broader package of strata reforms.

What is being proposed

Achterstraat’s report recommends banning commissions that can arise when a strata manager arranges building insurance or helps place other services for an owners’ corporation.

The commissioner argues that these payments can create misaligned incentives, reduce clarity for apartment owners, and contribute to higher ongoing costs.

How the current payment model works

In NSW, strata managers are typically private firms hired to handle administration and governance functions on behalf of owners’ corporations.

Beyond standard management charges, the report notes that some managers also receive commissions linked to insurance placement and other contracts, which it associates with weaker transparency for owners.

Evidence cited and why it matters now

The review states that commissions may reach 15% of insurance premiums, and it links that scale to higher overall expenses borne by apartment owners.

As an example, the report includes a case study where annual insurance-related commission payments rose from A$8,000 to A$27,000 over four years, with no stated increase in work performed in that instance.

The commissioner frames the issue as increasingly urgent because apartments are expected to make up a larger share of Sydney’s housing stock, citing a projection that they could represent half of all homes by 2041.

Industry positioning and transition design

The Strata Community Association, described as the sector’s peak body, has indicated support for moving away from commissions, suggesting some industry alignment with the direction of change.

However, the material also notes that parts of the sector oppose a ban, arguing that commission income helps cover work they describe as resource-intensive.

Implications, risks, and what remains unclear

The report estimates the shift could deliver more than A$300 million in benefits to NSW over 15 years, but the assumptions and detailed breakdown are not provided in the available material, limiting independent assessment.

Recommendations include phasing in the change over three years, reflecting a policy trade-off between reform speed and operational disruption for strata firms and owners’ corporations.

Key uncertainties flagged include how fee-for-service pricing would be set in practice, how disclosure obligations would be monitored and enforced, and whether total costs would fall or instead move between budget categories.

For markets, the immediate relevance is to revenue models connected to insurance placement and service contracting in the strata ecosystem, while the political focus is on household cost pressures as apartment living becomes more common.