This article discusses new laws addressing building managers conflict of interest to ensure transparency and prevent secret commissions in NSW strata schemes.
Question: What protections exist to prevent conflicts of interest or secret commissions when a building manager engages contractors on behalf of owners?
In my strata plan, the strata committee and strata manager have delegated the authority to engage contractors, such as electricians and plumbers, to the building manager. I’m concerned this arrangement could create opportunities for corruption or secret commissions. What safeguards are in place to prevent this between the building manager and contractors, and does the legislation address these potential conflicts of interest?
Answer: The new section 70A, addressing this, began on 27 October 2025.
Previously, under NSW legislation, there was no express statutory prohibition on a building manager receiving commissions or benefits from contractors they engaged. Nor were building managers subject to clear legal obligations to disclose referral fees or conflicts of interest, unless such obligations were included in the building management agreement. However, the owners corporation retains the power to define and limit the scope of a building manager’s authority under section 67 of the Strata Schemes Management Act 2015 (NSW) (the “Act”), including by imposing conditions around procurement, approvals, or financial interests.
The Strata Schemes Legislation Amendment Act 2025 (NSW) introduced a new section 70A into the Act, which states that the building manager must act in the best interest of the owners corporation. A violation of section 70A may result in penalties of up to 100 units for an individual or 200 units for an entity. Included in the duty to act in the best interest is the obligation to disclose potential conflicts of interests, which are set out in the new Part 2A of the Strata Schemes Management Regulation 2025 (the “Regulation”). Pursuant to section 17F of the Regulation, when proposing a contract to the owners corporation, the building manager must disclose any benefit they may receive from entering into a contract, or any pre-existing relationship with the contractor. This obligation continues to exist after the contract is entered into, as the building manager must also disclose any relationship or benefits with a supplier by written notice as soon as practicable under section 17G of the Regulation.
These changes commenced on 27 October 2025.
Julia Moroz
Bugden Allen
E: julia@bagl.com.au
P: 03 8582 8100
This post appears in the December 2025 edition of The NSW Strata Magazine.
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The reality is that this area of strata law is effectively unenforced. On paper, the legislation appears weak (penalty units too low for professional managers), in practice there is no meaningful oversight. Fair Trading does not proactively monitor compliance, and most strata committees have no visibility into back‑room arrangements or conflicts of interest. The system relies almost entirely on owners—who typically have no expertise—to identify breaches and take action at NCAT, which is a time‑consuming process.
My own strata scheme is a perfect example. We attempted to terminate our building manager on 06 November 2025 at the AGM. 15 days later, they suddenly produced a “new” contract—self‑signed with modified clauses—and claimed they were engaged until 2028. This was despite the fact that the most recent agreement tabled at the AGM was more than ten years old and only provided for a 12 months rollover clause. The implication was that current owners had no termination rights and that only “future” owners would be informed of their options in 2028.
This supposed contract exceeds the statutory 10‑year limit, yet when we raised this, they offered no explanation and showed no concern. We are a small building with no facilities—not even a lift—and the building manager is almost never on site. There is no operational justification for having a building manager at all. The only reason they exist is because the developer appointed a related entity during the initial period.
Do they care about compliance or transparency? Not at all. They rely on the fact that owners rarely have the appetite to take matters to NCAT. They very disrespectful to owners as well.
The broader issue is systemic: strata in NSW is poorly regulated, and there is no independent body ensuring compliance with the Act. Everything depends on owners taking action, yet owners are often fragmented, inexperienced, and reluctant to challenge strata managers or building managers who effectively control the scheme. The result is a governance environment where misconduct can flourish with little consequence.
Finally, for an owner the prospects of going to NCAT it is intimidating and the professional managers play on your fears. Massive power imbalance.
I’m in a strata retirement village with a village manager employed by the company who owns management rights. Does our village manager come under the same by-laws as a building manager? Due to the removal of services our village manager is doing the same job as a building manager.
Our VM is the secretary of the strata committee and also decides which quotes to accept.
Thank you for publicising what should have been law from the Stone Age, befitting some of the prehistoric species that end up as well-heeled BMs. Regrettably (to our knowledge at least) the clauses which would have ensured that BMs’ contracts prohibited potential or material COIs have never existed in many strata plans.