No Free Lunch: What the Strata Commission’s Review Really Means for Agents and Owners

Many a lawyer has felt broken or embarrassed in front of their client by reading too much into a judge’s comments or line of questioning during a trial. These things are not necessarily a good predictor of the eventual determination. The same might be true of the Strata Commission’s Review published by the NSW Productivity and Equality Commission (PEC) in November 2025.

PEC has been asked to consider whether prohibiting the payment of commissions, and other conflicted payments, to strata managing agents will ‘lead to better value for money, higher quality services, lower costs and simpler arrangements for strata owners.’ It will also look at how this might affect parties, including strata managers and service providers. It’s a large remit, and for strata managers, a lot is riding on the outcome. About 15 - 20% of most managers’ revenue comes from insurance commissions.

While the PEC review is confined to NSW, this issue is being monitored nationally. This report will influence other states and territories.

The 40-page discussion paper from PEC reveals some interesting (new) facts about the strata management market. It asks lots of questions to generate feedback, and poses 3 possible outcomes –

1.     Industry self-regulation imposing a ban on insurance commissions

2.     Prohibiting strata managing agents from accepting commissions

3.     Prohibiting managers buying goods and services on behalf of owners corporations involving commissions

Interestingly, the report foreshadows ‘no free lunch for strata owners’. PEC predicts that while insurance commissions will come down, strata managing agents’ fees will go up. Under this scenario, financially, the strata owner will be no better or worse off. This is consistent with early reports from significantly sized businesses already shifting from commissions for insurance to fee-for-service models.

Here are PEC’s expected impacts for owners, manager -

‍Owners

·      Clearer presentation of strata management costs makes it easier to compare fees

·      Increase in strata management fees, offset by lower insurance premiums and service costs

·      More effective price competition in the strata market, supporting price and quality improvement

‍Strata managers

·      Reduced disclosure burden

·      Short-term costs of transitioning to new funding model

·      Lower profit margins from more effective competition

‍Service providers

·      Transition costs change to new financial relationships and new ways of promoting services

·      Increased competition and opportunities for new entrants

·      Reduced commission payments are offset by lower prices to end consumers

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If we were to play the lawyers’ game, what conclusions might we draw from this paper? Is anything to be concluded from the fact that allowing commissions to stay is not listed as an option? Is the goal that everyone suffers a little, and no one profits, for the sake of ‘levelling the playing field’?

The correct answer is that we should draw no conclusions from the paper. It’s designed to elicit feedback, and to satisfy the government’s Better Regulation Framework to do so. This is but one part of PEC’s process. In the end, this is the government’s decision. A government deeply concerned about the housing crisis and the cost of living.

Predicting the government’s decision is a mug’s game. The only thing we can be certain of is that, across the nation, managers are engaging more with the idea that commissions must go. Both small and large players are ditching them one contract renewal at a time. Trust in strata management is slowly being restored.