Question: We understand the strata manager’s right to a commission. However, we object to the commission increasing annually in line with rising building insurance costs.
What can the strata committee do to address the strata managers’ yearly increase in building insurance commission due to the ever-growing industry-wide higher costs of building insurance?
We have raised the insurance commission with the strata managers, and the response was:
‘We disclose our fees received for insurance on each AGM Agenda. If the owners corporation do not wish to pay an insurance commission, then we would have to adjust our management fee as the building would not be profitable without that income.’
We accept that the strata manager is entitled to a commission fee, but not a commission fee that increases yearly based on increased yearly building insurance costs.
Answer: As commissions are legal, there is little legally that can be done at the moment so long as the required disclosure is complied with.
At the moment, the laws (e.g. SSMA/SSMR or CLMA/CLMR) don’t prohibit the paying of insurance commission to strata managers. The Strata Managing Agents Legislation Amendment Act 2024 (NSW) which was assented to on 30 September 2024, strengthened the disclosure obligations of strata managers in respect of commissions or financial remuneration from a service provider, but there isn’t a prohibition on the paying of a commission. The Strata Scheme Legislation Amendment Bill 2024 also doesn’t, in its current form, propose a ban on commissions.
As commissions are legal, there is little legally that can be done at the moment so long as the required disclosure is complied with, and the comments don’t suggest there was noncompliance. As the commission is a percentage of the premiums of the insurance, the commission would increase as the cost of the insurance increases.
Should a strata manager elect to increase management fees where the agreement comes up for renewal, in the event the OC elects to not pay any insurance commission, for the moment, that is something the strata managing agent is entitled to do.
The OC has the right to negotiate with the strata manager in respect of commissions and fees or consider alternative providers, but there isn’t much for now in the form of a legal remedy.
This post appears in the February 2025 edition of The NSW Strata Magazine.
Matthew Lo
Kerin Benson Lawyers
E: enquiries@kerinbensonlawyers.com.au
P: 02 8706 7060
Leave a Reply