Clinical Report Shreds Australian Strata Management Business Model: Johnston Exposes Systemic Conflicts of Interest

In the way of a truly independent researcher, Nicole Johnston quietly released her latest report on strata management this week. She will let her work speak for itself. Then, she will leave it to the rest of us in strata to dissect, discuss, and yes, disagree about what it means. One thing is for sure: this report will speak loudly, and it will speak to the right people.

The title pulls no punches: At the crossroads: addressing pervasive conflicts of interest in strata management (2025). What follows over the next 55 pages is the clinical annihilation of the current business model used by strata managers in Australia. Every aspect of the model is put under the microscope and comes up wanting.

The report shows that conflicts of interest are embedded in core business models. It identifies:

• Insurance commissions, the dominant revenue stream for many firms, often 15–25 % of income; creating dependence and cross‑subsidisation.
• Developer consulting arrangements, where managers provide early advisory services for guaranteed post‑registration contracts.
• Vertical integration, in which firms hold interests in maintenance, banking, insurance, or compliance companies that service their own clients.
• Staff incentive schemes (“Schedule B fees”), rewarding employees for upselling extra services.
• Supplier referral and sponsorship deals, blurring lines between training, events, and kickbacks.

Having reviewed 153 company websites and 35 management agreements, conducted 20 in‑depth interviews with senior managers, and 16 owner‑participant sessions, the author concludes that Disclosure — the primary regulatory safeguard — is judged largely ineffective. Many contracts reproduce token transparency while concealing key details in small print. Owners often don’t understand or question commission structures, affiliated‑entity relationships, or the limits of delegated authority. This perpetuates what Johnston calls an ‘illusion of transparency’.

In what for me is the most insightful part of the report, Johnston concludes that these problems represent systemic industry dysfunction rather than isolated misconduct. Relying on disclosure cannot fix the deep ethical and structural flaws sustained by low base‑fee competition and misleading revenue norms. Voluntary reform is deemed unlikely given entrenched market incentives.

At the Crossroads portrays an industry ‘at a precipice’ — professionally indispensable yet ethically compromised. Johnston argues that robust statutory reform, enforced transparency, and committed leadership are essential to restore integrity. She concludes that the disruptive shift from commission‑based dependency to transparent fee‑for‑service professionalism is both necessary and achievable. Early adopters are already proving that viable ethical models work.