50 Years of Strata Wisdom Just Got Shattered - Here’s Your Survival Guide

It was always going to be a tough morning. The first four speakers at Strata Impact Conference 2025 had until lunch on day one to challenge 50 years of conventional wisdom about conflicts of interest in strata. They did well. The upshot - disclosure fixes nothing. If you must disclose it, you shouldn’t be doing it.

The academic, legal, and policy groundwork for reform is now laid. The next bit will be messy. Managers are already taking to the airwaves to shoot the messengers. Criticism is being levelled that the messengers (we) are not strata managers and are bringing the sector down. Others are in denial. Some have their heads down as they contemplate selling because it’s all too hard. Nothing surprising here; these are all normal reactions to cultural change.

For those getting ahead of the pack, and walking away from insurance commissions and other related party transactions, it’s tough going. Leadership always is. Insurance commissions come in big, juicy lumps. Increased fees for service are harder to earn. Smaller, but steadier. The government has the Productivity Commission working out the impact of this on business, and ways to ease the transition, but that’s not helping now.

We’ve had a lot of talk about the problems. Now it’s time for some solutions:

• An overdraft smooths out income, while commissions are replaced by increased fees for service. This process is likely to take two or three years. Debt is not bad if used for the right purpose. Better to have a lifeline at the ready than to drown in uncharted waters. Talk to your bank.
• Ending related party transactions doesn’t have to stop you from expanding your range of services. Managers are entitled to be paid, and make a profit, for the services they perform competently. It’s how it’s structured that matters. Separate companies servicing multiple parties, operating under separate brands, and with separate agreements are at the heart of the problem. Talk to your lawyer about a corporate restructure, with your full range of services being offered by one entity under the one agreement. Caretaking, facilities management, project management, and advisory services are all open to strata managers, with the right people on board, if the right legal structure is adopted.
• Development consulting services are more important than ever. Developers aren’t up for, and don’t want to do, what is now necessary to establish a compliant strata entity from scratch. You can do this work and charge good fees. You can’t take a management agreement in return. If you want the ongoing gig, engage a strata consultant for the strata to run an independent tender process. Then, throw your hat in the ring. Your knowledge and experience setting up the scheme may work in your favour. If you get the appointment, it will be for the right reasons and done the right way.

There is upside for strata managers who restructure and adopt new ways:

• Trust will be rebuilt – new research is on its way that will prove what a problem this is right now, even though it may not be obvious to managers.
• Business valuations will increase – insurance commissions, and other forms of non-management fee income, are often discounted in valuations and sales. Increased fees for service will count.
• Practice management will get easier – managing and disclosing existing commissions and related party arrangements is impossibly hard. Being free of this compliance burden will be liberating.

Enough of the talk.

Embrace the post-conflicts strata world.

Win the race for value.

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