NSW: Can a strata manager pay themselves from trust funds for lost commission?

Question: Our Strata manager paid his company from our trust account to make up for lost insurance commission. Is he authorised to do this?

Our strata manager paid his company $450 from our trust fund because he did not receive commission for renewing our strata building insurance. His argument is that this is less than the usual 20% commission.

I could not see any reference to justify this action in our contract. Is this general practise?

Answer: The strata manager has to decide what is more important – the $450 or having an annoyed scheme who may not re-appoint them.

To the best of my knowledge, this is not normal practice. Further, the strata manager cannot be paid anything which is not included in their agency agreement.

So in brief, either:

1. The payment is not a part of the agreement, so must be refunded immediately, and is probably reportable; or
2. The agreement does actually have a provision saying if no insurance commission is received, the strata manager is entitled to a payment of $x instead, meaning the payment is authorised. Even here, simply paying it to oneself is probably poor form without confirmation or further disclosure and the strata manager has to decide what is more important – the $450 or having an annoyed scheme who may not re-appoint them.

This post appears in the November 2022 edition of The NSW Strata Magazine.

James Moir
Madison Marcus
E: Strata@madisonmarcus.com.au
P: 02 8022 1222