For decades, SCA (NSW) has relentlessly defended the right of strata managers to receive insurance commissions that are properly declared. Against countless attacks from abolitionists and policymakers, they have prevailed. That ended Tuesday morningwhen they ran the white flag up the pole. Their announcement was as courageousas it was surprising. From January 2026, their members will phase out insurancecommissions, and move to a different charging model, presumably fee forservice.
This position is courageous for its significant financial impact on members. Up to 33% of some managers’gross revenue comes from insurance commissions. It is a widespread practice adopted by most management companies.
It’s surprising not just because it reverses a long-held position, but because it pre-empts the NSW Government’s final announcement on the matter and the Productivity Commission’s investigations into the financial implications of such a move.
While welcomed by manymanagers and commentators, me included, as the right thing to do, there are stillmany questions.
How will the transition work? Our clients already transitioning to a ‘commission-free fee for service’ business model thinkit will take two to three years to wean themselves off big, lumpy commissionincome.
Will strata management fees goup?Yes, probably; but enough to replace this income? Probably not. What does that mean for small business?Overdrafts? Reduced headcount? No more wages growth? Forced sales?
Will insurance companies offering insurance direct to owners corporations reduce their premiums by the 20% they were paying strata managers? Yes, and if owners corporations go to insurance companies direct, the better insurers will give them a guarantee that they have not paid any commission on the owners corporation’s policy. The real issue is the brokers.
Will insurance brokers still be allowed to charge commissions to owners corporations? Anyone’s guess. Up to 80% of commissions paid by insurance underwriters are paid to brokers. OCs using brokers won’t free from commissions unless the NSW Government bans all commissions on strata insurance, not just those paid to strata managers.
Will the government take on the brokers? So far, they’ve ducked the issue as one for the feds. And it’s not. The NSW Government has protected consumers from commissions on other forms of insurance, like CTP. They could easily amend the strata legislation to say that no commissions on strata insurance are to be paid to anyone.
Will SCA (NSW) lose members? Possibly. Some may choose to go it alone and try to hold onto commissions, at least until the government’s position is known. Some will resent that the board took this decision instead of voting on it at a general meeting. SCA’s competitor, REINSW Strata Chapter, last week affirmed they are pro-commission.
Will other SCA federation members follow SCA (NSW)? Maybe, SCA (ACT) was the first to say they would lobby government to do away with commissions. I’m not sure about the others. In any event, if commissions go in NSW, it’s hard to see how other governments won’t have to follow, despite what the other SCA chapters decide.
How will SCA and the government deal with other forms of secret commissions and related party transactions in strata? Insurance commissions paid to strata managers has dominated debate since the ABC Netstrata investigations. Yet Netstrata was not taking insurance commissions. Instead, it had interests in a broker, and other related parties servicing their owners corporations. Netstrata, and others with similar arrangements, are still SCA members, and they have not faced sanctions. Insurance commission is only part of the story; there’s a whole lot more going on.
What will NSW Premier Minns do? Despite the SCA (NSW) announcement and the Fair-Trading Commissioner’s prompt congratulatory post, Premier Minns could do a backflip. He’s a friend of Netstrata. And on backflipping he’s got form. There’s a housing supply and affordability crisis. He recently made a captain’s call and reversed law reform on two significant property investment related issues: tenant rights on no-fault terminations and the right to keep pets. In doing so, Premier Minns sensationally overruled the responsible minister (Minister Chanthivong), and blindsided stakeholders who had been consulted extensively over the reforms.
What will older owners of small to medium-sized businesses do if commission income is cut? Deny and fail? Adapt or sell? The private equity firms are circling, as are the seasoned aggregators. They smell blood in the water. It might be their time.
So, back to Neil Armstrong’s famous line. SCA (NSW) has taken a gargantuan step towards professionalisation. As fiduciary agents, strata managers can’t have conflicts of interest, declared or otherwise. But for strata progressives, this is a small step. Much more needs to be done to restore trust and confidence in the strata market and achieve fair fees for a fair service for the benefit of all.
Michael Teys advises strata management businesses on improving profitability through professionalisation and streamlined operating systems.
He has more than 30 years’ experience as a strata lawyer and academic and has owned 11 strata management agencies throughout Australia. He has a Master of Philosophy (Built Environment) and Bachelor of Laws. He lectures and writes widely about strata management issues in Australia and internationally.
