Question: Although our OC managers play no role in arranging our strata insurance or claims management, they take a 5% fee. Can we object?
Our independent Insurance broker receives 16% commission from the insurer. Our owners corporation (OC) manager plays no role in arranging insurance or in claims management, yet they claim to be entitled to a 5% fee.
The total 21% commission is a lot for a small OC. Do we have grounds to object to the manager’s commission?
Answer: This will depend on the terms outlined in the strata management contract.
The OC may have grounds to object. However, the feasibility of doing so will largely depend on the terms outlined in the strata management contract. First, we recommend the OC review the contract to identify any clauses related to insurance arrangements, broker commissions, and additional fees.
Some strata management contracts include “penalty clauses”. These clauses impose additional costs if the OC chooses to work with an insurance broker who does not pay commissions to the strata manager.
An OC always has the right to raise objections to any terms it finds unfavourable. Even if a penalty clause is in place, the OC may still approach the strata manager to discuss potential adjustments. However, it is worth noting that while some strata managers may be open to negotiating these terms, others may prefer to adhere strictly to the existing contract terms. Therefore, flexibility in negotiating during the contract term will vary depending on the strata manager.
If negotiations are unsuccessful or the strata manager is unwilling to alter the terms, the OC can still consider renegotiating these points when the contract comes up for renewal or exploring alternative strata management providers who may offer more choice and flexibility.
Ultimately, for strata buildings to maintain competitive insurance costs, they must exercise their choice and select providers who best suit their unique needs.
This post appears in Strata News #731.
Tyrone Shandiman Strata Insurance Solutions E: tshandiman@iaa.net.au P: 1300 554 165
This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.