The NSW government says there is “more to come” on strata reforms after last week passing legislation to improve disclosure and toughen penalties. 

The legislation was introduced before Four Corners put the spotlight on the strata sector. The program followed an ABC report earlier in the year focused on NSW company Netstrata. 

“We have heard about strata managing agents charging excessive fees and commissions when buying strata insurance and using the services of subsidiary companies to obtain financial benefits without their clients’ knowledge,” Labor’s Mark Buttigieg said. “The bill is the first step in the government's response to those problematic strata management business practices, and further work is under way.” 

The government has said banning commissions to strata agents is “absolutely on the table” and NSW Fair Trading has been tasked with consulting property owners and the industry on how that reform would work in practice.

A statement of public interest attached to the bill says new disclosure requirements for insurance quotes are largely consistent with a Strata Community Association (SCA) best practice guide. 

“This means that strata managers already following the guide will need to do very little additional work to comply with these new requirements,” it says.

“However, making it law puts all strata managers on a level playing field.” 

The best practice guide was developed last year and made mandatory nationally under the SCA code of conduct in July. The professional association’s strongest direct penalty is to expel a company. 

The NSW legislation introduces significantly higher maximum penalties and penalty infringement notice amounts compared with existing laws, which Mr Buttigieg says have “remained static for many years and have fallen far below market value”.  

“This makes it easier for an agent to think that doing the wrong thing and being hit with a low penalty is just a part of the cost of doing business and making profit, especially when the commissions they receive are far higher than the penalty amount,” he told parliament. “This is just not on.” 

The legislation aims to increase transparency around conflicts of interest, requires clear disclosure on commissions and fees paid, and bans strata managers from receiving a commission where the owners’ corporation itself arranges the insurance. 

SCA has said it welcomes the strengthening of measures and protections that further professionalise the sector and deliver better outcomes for consumers, and it continues to work collaboratively with governments and regulators. 

Mr Buttigieg said input on the bill was also received from the Owners Corporation Network, Australian College of Strata Lawyers, the National Insurance Brokers Association, Australian Consumers Insurance Lobby, industry consultant John Trowbridge, Steadfast, Financial Counselling Australia and the Financial Rights Legal Centre. 

Consumer groups have called for a national inquiry into strata issues, suggesting it could be led by the Australian Competition and Consumer Commission or the Productivity Commission.