Strata reform failure leaves apartment owners at the mercy of predators

When then consumer affairs minister Nick Staikos announced a review of the laws governing owners’ corporations a year ago, he was clear about its aims.

The panel of three experts, headed by one of his predecessors in the ministry, Marsha Thomson, needed to look at “dishonest business practices, unfair contracts, and inappropriate commissions”, the ultimate goal being “to ensure the one in four Victorians who call a strata-managed property home are treated fairly”.

The Allan government knows, then, that the current system is not delivering fairness across the board to strata owners.

In the last year alone, our reporter Rachael Dexter has uncovered management companies in the $471 billion Victorian sector charging unlawful “administrative” and “debt recovery” fees; pocketing hidden commissions of up to 20 per cent from the insurance companies they present to apartment owners – a practice that is currently quite legal; and most recently an employee of one of the country’s largest strata management firms trawling for a kickback on a contract tender.

Since the Owners Corporations Act was legislated in 2006 by the Bracks government, in which Thomson was minister, the number of corporations has risen from 65,000 to 128,896 in 2024, with the number of lots rising from 480,000 to 1,044,400 over the same period. It is a sector into which more and more people are expected to move as governments encourage medium and high-density living.

When the contents of the review – submitted to the Allan government six months ago – were finally released this week, they included some welcome recommendations. The panel called for a ban on commissions to strata managers from insurance companies, with such payments to be replaced by a fee-for-service model. It also said that in the case of strata properties being used as Airbnbs, the act “should be amended to explicitly address the issue of parties” being held at properties.

Most importantly of all, the panel concluded that Victoria’s current regulatory framework, overseen by Consumer Affairs Victoria (CAV), is inadequate. Pointing to the outcomes of the Hayne Royal Commission into the banking sector, the panel argues it’s not good enough to rely on disclosure by strata management firms; “prohibitions are necessary to prevent harm”.

The review explicitly lays out how CAV has failed to execute a single enforcement measure and has not cancelled any strata manager registrations since 2019, despite thousands of complaints and requests for help from owners each year. It also shows how the burden for pursuing cases of misconduct often falls on owners’ corporations and residents, in a process described as “lengthy, expensive and laborious”. It concludes that CAV and the Victorian Civil and Administrative Tribunal lack the necessary powers to penalise firms that go astray.

The government’s response – issued at the same time as the report itself – is a weak-kneed disappointment. The question of regulating parties at Airbnbs is sidestepped, with new Consumer Affairs Minister Paul Edbrooke warning of “overreach”.

On insurance, the number one expense for owners’ corporations, the government has deferred talk of a ban on commissions – which the review described as creating a systemic conflict of interest that drives up owner premiums – arguing “a ban could potentially have strong market effects”.

The Age believes the minister’s first responsibility is to consumers – in this case, owners and by extension tenants – not to companies seeking to preserve questionable revenue models. When Dexter questioned the minister on the supposed need for more analysis on insurance commissions, given the work already done on this subject by New South Wales’ Productivity and Equality Commission, Edbrooke suggested those conclusions were somehow only valid in that state.

We reject that argument. Strata management firms operate nationwide, and the industry body in NSW has already indicated it is prepared to phase out insurance commissions.

The minister’s response on regulation was even more worrying. With the review’s report in his hand, we do not see how he could credibly argue that “there’s no evidence that I’ve got that Consumer Affairs hasn’t been doing the job properly”. The review identifies just seven penalty provisions in Victoria’s Owners Corporations Act, compared to more than 75 in New South Wales. Our northern neighbours have had an independent commissioner pursuing problems in the sector since 2023.

The Age believes a proactive approach that places the burden on managers to do the right thing is the way forward. In the words of Sam Reece, the chief executive of Australian Apartment Advocacy: “With Consumer Affairs Victoria taking no action against strata managers in the last six years and owners waiting 52 weeks for a VCAT hearing, it is clear that the system is broken and urgent action is required.”

When Edbrooke tells us that “most OCs [owners’ corporations] are doing the right thing”, as he did at a press conference this week, we wonder if he is properly across who’s who in his portfolio. It’s not the owners but the managers whose conduct is of pressing concern.

The government wants Victorians to embrace apartment living. This week it had a chance to reset the rules and protections they live under. Instead, it has kicked crucial reforms into the long grass and left strata owners unnecessarily vulnerable in a world where predatory practices can continue unchecked.

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