A significant shift is underway in Canberra's property management sector as strata companies increasingly abandon traditional commission models for insurance services. This movement toward fixed-fee arrangements reflects growing concerns about transparency and potential conflicts of interest within the industry.
The Commission Model Under Scrutiny
Insurance commissions have long been considered a standard component of Australia's strata system, but recent years have seen increased examination of their role. Media investigations have highlighted concerns that these commissions might disadvantage clients, prompting industry reassessment.
While no laws in the Australian Capital Territory explicitly prohibit taking commissions, companies must disclose them. Despite this legal allowance, a growing number of Canberra strata firms are voluntarily opting out of commission-based arrangements in favor of more transparent pricing structures.
Leading the Charge for Change
Vantage Strata, a prominent Canberra-based company, is at the forefront of this transition. Chief Executive Officer Rupert Cullen explained that his organization anticipates commissions will likely be prohibited in the coming years, prompting their proactive shift away from the model.
"We've taken the view that insurance commissions have been a subsidy to the strata industry for a long time," Mr Cullen stated. Under commission arrangements, strata managers typically organize insurance for owners' corporations and receive either direct payments from insurers or a portion of commissions from preferred brokers.
This system has historically kept strata management fees artificially low, with commissions effectively subsidizing service costs. However, the model creates potential conflicts of interest, as companies might prioritize insurers offering higher commissions rather than those providing the best value or coverage.
Industry Response and Implementation
Mr Cullen reported that all owners' corporations his team consulted have chosen to continue with Vantage Strata despite transitioning to a fee-for-service model that could potentially increase costs. The company has already moved half its portfolio to the new arrangement and plans to completely phase out commissions by March 2026.
"The Canberra market is intelligent, and it's educated. They're aware of the challenges, and they're aware of how commission fees work. They don't want conflicts of interest," Mr Cullen observed, noting that several other companies are following similar paths.
However, not all industry participants support this direction. The situation mirrors tensions recently seen in New South Wales, where the Strata Community Association initially planned to ban member commissions following an ABC Four Corners investigation in September 2024.
That proposal encountered significant resistance, including threats from the PICA Group—a leading strata management organization owning multiple major companies—to withdraw membership. The association subsequently made commission refusal voluntary rather than mandatory.
Legal Perspective on Disclosure
Christopher Kerin of Kerin Benson Lawyers, a prominent strata legal expert, suggested similar conflicts could emerge in the ACT. He noted that the merit of taking or refusing commissions should be determined by those directly involved in the industry.
In the ACT, strata managers must inform owners' corporations about any commissions received, operating under a duty to act in clients' best interests. "There's nothing wrong with commissions per se, so long as people properly disclose them and understand they are happening," Mr Kerin commented.
He identified the core issue as inadequate disclosure rather than commissions themselves. "The trouble is, people are not aware of it because they don't read the fine print. The problem arises when the disclosure is perhaps not as fulsome as it could be, and then people feel they are being ripped off."
This industry evolution represents a broader movement toward greater transparency in property management services, with Canberra companies positioning themselves ahead of potential regulatory changes while responding to client demands for clearer fee structures.
