If you're one of the four million Australians living in strata or community title properties, you might be unknowingly paying inflated fees due to hidden kickbacks in the strata management industry [1,2]. Recent investigations have shed light on this widespread issue, revealing a troubling pattern of unethical practices that could be costing you more than you realise.
Strata managers, who are supposed to act in the best interests of property owners, have been found to engage in various questionable practices:
Hidden kickbacks: Some managers receive undisclosed payments from builders, insurance companies, and other service providers1.
Inflated brokerage fees: Investigations have uncovered cases where brokerage fees for insurance were charged at three times the typical rate6.
Undisclosed ownership: Some managers have hidden ownership in companies they deal with, creating a clear conflict of interest1.
Opaque schemes: Large companies have been implicated in schemes that channel insurance kickbacks to strata management firms without disclosing this to apartment owners7
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While exact figures vary, the financial impact of these practices on individual apartment owners can be significant. In some cases, insurance brokerage fees have been found to be triple the normal rate6. This means you could potentially be paying hundreds or even thousands of dollars more than necessary for various services.
Recent Developments
In recent years, there have been some positive changes in the industry. For example, in New South Wales, the 2015 strata reforms introduced new provisions requiring strata managing agents to disclose commissions and training, and prohibiting the receipt of gifts over $605. However, these disclosures are often only made when specifically requested, leaving many owners in the dark.
Taking Action
As a property owner, you have the right to know if your strata manager is receiving any benefits that could influence their decisions. Here's what you can do:
Ask for disclosure: Request a full disclosure of any commissions, kickbacks, or benefits your strata manager receives.
Review your fees: Compare the fees you're paying for various services with market rates to identify any significant discrepancies.
Attend meetings: Participate in owners' corporation meetings and ask questions about financial decisions.
Use your voice: If you suspect unethical practices, report them to relevant authorities like the ACCC or ASIC.
Draft Letter to Your Management Company
To help you take action, here's a draft letter you can use to request information from your strata management company:
text
Dear [Strata Management Company],
As an owner in [Your Property Name], I am writing to request full disclosure of any commissions, kickbacks, or other benefits received by our strata management company in relation to our property.
Specifically, I would like to know:
1. Any commissions received from insurance companies, contractors, or service providers.
2. Any ownership interests in companies providing services to our property.
3. A breakdown of all fees charged, including brokerage fees for insurance.
Please provide this information within 14 days, as required by our state's strata legislation.
Thank you for your prompt attention to this matter.
Sincerely,
[Your Name]
Remember, transparency is key to ensuring fair and ethical management of your property. By staying informed and asking the right questions, you can help combat the kickback culture and potentially save yourself and your fellow owners significant amounts of money