Strata management contracts specifying insurance commission levels over the life of the agreement are disadvantaging property owners, the Australian Consumers Insurance Lobby says.

Some standardised contracts used in the sector say that if the commission paid is less than 15% of the base premium, the owners must pay a fee to the manager to make up the difference.

“While these clauses may appear to offer upfront disclosure, they effectively limit the owners’ corporation’s ability to seek competitive insurance options, thereby disadvantaging consumers by reducing choice and potentially leading to higher costs,” ACIL chairman Tyrone Shandiman told insuranceNEWS.com.au.

ACIL has long criticised the practice, which was highlighted again today as part of a broader ABC report on adverse practices, often within Strata Community Association contract templates. 

Mr Shandiman says contracts containing commission levels cannot be considered adequate disclosure because the terms are often buried in lengthy agreements that most consumers do not thoroughly review. 

“This is particularly problematic when these contracts are presented as ‘industry standard’, leading consumers to assume they are inherently fair,” he said. “Furthermore, strata management contracts typically span three years, while insurance contracts are renewed annually.”

In the ABC report, strata building defects specialist Bronwyn Weir also highlights cases in which an owners’ corporation that buys its own insurance must still pay its manager an amount equivalent to 20% of the base premium plus GST.

“It’s appalling that SCA would put such clauses into a contract and encourage their members to use them,” she says in the article.

The ABC report criticises contracts over clauses that waive managers’ liability and termination conditions making it difficult to end strata management agreements.

An SCA spokesperson quoted in the report says template contracts it provides are not mandatory and are intended as a resource only.

Recent legislation passed in NSW bans strata managers from receiving a commission where the owners’ corporation itself arranges the insurance.