NSW announces Strata Management Industry reforms amid scandal
NSW Fair Trading said it's received almost 1000 complaints about strata agents in the five years to 2023
In response to a significant scandal within the strata management industry, the NSW government has announced stringent reforms aimed at cleaning up the sector and restoring public confidence.
The new strata laws that promise to “rise to the challenge of living in higher density homes”, follow an extensive ABC investigation in March this year that exposed systemic exploitation and undisclosed kickbacks, particularly spotlighting the prominent firm Netstrata.
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The investigation revealed that Netstrata had been charging exorbitant insurance fees and accepting hidden commissions, leading to the resignation of Stephen Brell, the former NSW president of the Strata Community Association (SCA).
Minister for Better Regulation and Fair Trading Anoulack Chanthivong emphasised the necessity of these reforms to “stamp out bad behaviour” within the industry.
In a statement last week, Chanthivong highlighted that the actions of a few managing agents had severely impacted public confidence in apartment living. “NSW Fair Trading received more than 965 complaints about strata agents in the five years to 2023, with over half concerning rules of conduct or financial matters,” he noted.
The proposed changes include:
- increasing the maximum penalties and penalty infringement notice amounts for existing agent obligations to disclose information about commissions.
- strengthening the conflict-of-interest disclosure requirements.
- banning agents from receiving a commission on insurance products when they don’t play a role in finding the best deal for residents.
- strengthening NSW Fair Trading’s enforcement and compliance powers.
The higher penalties, greater transparency and new enforcement powers follow an $8.4 million investment in more resources for the Strata and Property Services Commissioner in this year’s budget.
The Government will consult with key stakeholders such as the Owners Corporation Network and Strata Community Association on the draft laws in the coming weeks. The Parliament will consider the new laws later this year.
“These reforms are critical to supporting confidence in investing and living in strata schemes,” Chanthivong said. “We want to change the perception that strata managing agents easily take advantage of owners by significantly increasing the consequences for those who do the wrong thing.”
The ABC investigation uncovered that Netstrata’s insurance arm was charging fees up to 110 percent of the insurance policy’s base premium, far above the typical brokerage fee of about 20 percent, without disclosing these fees to owners.
This revelation sparked widespread demand for reform, with figures like Chris Irons, former Queensland Body Corporate Commissioner, and Trevor Rawnsley CEO of Australian Resident Accommodation Managers Association (ARAMA) advocating for greater regulation and transparency.
Read, how the management rights industry reacted to the strata scandal by Grantlee Kieza published in Resort News – subscribe HERE
Following Brell’s resignation, the SCA announced an “independent review” into Netstrata and a “formal complaints management process” against the firm, alongside an investigation by NSW Fair Trading. Alisha Fisher, CEO of SCA Australasia, reiterated the industry’s commitment to raising standards and improving practices among its members.
These reforms are seen as a critical step towards ensuring that unit owners receive value for money and that strata management companies operate transparently and ethically.
The government will consult with the industry ahead of introducing legislation in August.
As the NSW government moves forward with these reforms, it’s hoped that the interests of unit owners will be better protected and the whole industry operates with more integrity and fairness.
The new legislation is expected to make a lasting impact on the strata management sector, setting a precedent for other states to follow, to foster more confidence in apartment living as a viable housing option.
Mandy has almost two decades of accommodation and tourism industry writing experience and is Editor of AccomNews & Resort News, Publisher of SchoolNews & Director of Multimedia Pty Ltd. She is a retired registered nurse with a 25-year NHS career that followed a few unforgettable years in hotel housekeeping.
