The NSW parliament is debating reforms to toughen strata regulation, with a bill now introduced by the Labor government to the upper house.

The Strata Managing Agents Legislation Amendment Bill 2024 bans strata agents from receiving commissions on insurance products when an owners’ corporation secures the quote and arranges the purchase independently. It also increases disclosure obligations and raises penalties.

Parliamentary Secretary for Customer Service Charishma Kaliyanda told the lower house yesterday that NSW has more than 85,000 strata schemes housing more than 1.2 million people, and the bill was developed after feedback from many residents, owners and stakeholders.

“I understand that other stakeholders include the National Insurance Brokers Association, Australian Apartment Advocacy and Australian Consumers Insurance Lobby, as well as a range of others,” she said. “I commend their work ... I hope that this will result in a fairer strata system for all.”

Opposition spokesman for Fair Trading Tim James said the Liberals and Nationals would support the bill, but it “only goes some way” towards addressing all the strata risks, failures and problems that have been the subject of media reports.

“I urge the government to act more widely, deeply and expeditiously to make our state’s strata schemes as effective, modern and positive as [they] can be,” he said.

The bill was introduced into parliament last month following an ABC report earlier this year that focused on NSW and management company Netstrata.

A more recent Four Corners program highlighted wider problems around transparency and cross-ownership, spurring consumer group calls for a national inquiry.

Greens MP Jenny Leong criticised the NSW bill for “in effect” legitimising the payment of commissions by permitting them as long as the agent discloses to the owners’ corporation the amount, how it was calculated and the relationship they have with the provider.

“The problems with strata are not isolated cases of a few bad apples,” she said. “They are the result of an entire ecosystem that is designed to maximise profits and considers consumer protections as a mere afterthought.”

The statement of public interest attached to the bill says the NSW government decided not to go further on commissions at this time, and some strata sector stakeholders argued they are an essential income stream for managing agents.

“Banning commissions outright is not preferred at this point in time,” the statement says. “It is standard practice in the strata industry for strata managing agents to receive commissions from insurance providers. This is a complex issue that the government will continue to explore in consultation with stakeholders as part of future reforms to NSW strata laws.”

New disclosure requirements for insurance quotes are largely consistent with the Strata Community Association best practice guide, with the bill seeking to strike a balance, it says.

“This means that strata managers already following the guide will need to do very little additional work to comply with these new requirements. However, making it law puts all strata managers on a level playing field.

“Strengthening NSW Fair Trading’s compliance and enforcement powers will ensure there is a strong penalty framework and appropriate compliance and enforcement powers for the regulator to deter non-compliance and ensure fair competition in the strata industry.”