‘Ethically indefensible’: The kickbacks costing Victorian apartment owners thousands

Strata managers are pocketing secret kickbacks of up to 20 per cent from the insurance companies they present to apartment owners – and the practice is perfectly legal.

With strata laws now under review by the state government, owners’ advocates say the “perverse” and “indefensible” hidden commissions must be banned in a looming overhaul.

While insurance premiums often represent the single largest expense for most building budgets, a “distorted” industry business model has allowed strata firms to subsidise low management fees with kickbacks that remain invisible to the majority of owners actually paying the bills.

The business of managing apartments has been built on a foundation of “institutionalised” conflicts of interest that systematically place manager profits over the legal interests of owners, according to damning new research which amps up pressure on the Allan government to outlaw the practice to protect the growing number of Victorians living in apartments and townhouses.

Dr Nicole Johnston, a socio-legal researcher and former lawyer who authored a recent report with NSW Fair Trading, warns these aren’t isolated incidents but a “fundamental structural problem” institutionalised over 30 years which needs to be finally stamped out.

Johnston has previously produced commissioned research for the strata industry, but her latest work calls for a full legislative ban to restore professionalism, and notes reports of the problematic practice were highlighted in this masthead as far back as the early 90s.

Stumbling in the dark

While managing agents have a legal duty to act in the best interests of the owners in a building, Johnston’s report reveals profit is systematically prioritised over that duty. The financial stakes are highest for the 65 per cent of Victorian owners grappling with building defects; skyrocketing premiums for these “risky” buildings result in a proportional windfall for managers.

Strata managers became legally required to disclose whether they receive commissions in 2021. However, 2025 survey data from owners advocacy group Australian Apartment Advocacy – which receives sponsorship from “preferred suppliers” in the industry – showed 59 per cent of Victorian owners said they do not know if their strata manager receives a commission. Only 34 per cent were certain their manager did not take kickbacks.

Melbourne apartment owner Mark Richards, who has been an owner in four different owners corporations, says his managers have rarely been forthcoming about insurance or other commissions they receive.

“It’s like pulling teeth,” he told The Age. “Even when asking at AGMs.”

While Richards is open to small, mandatory declared commissions of around 5 per cent to reflect work performed in dealing with drawn-out insurance claims in problem buildings, he labels the current 20 per cent standard “unreasonable”.

Is disclosure enough?

There are divided views on the controversial practice from the various groups representing strata owners.

Under new Australian Securities and Investments Commission rules that took effect in July last year, brokers and many strata managers must now obtain explicit “informed consent” from owners’ committees before they can lawfully pocket a cent in commission – it cannot be buried in paperwork.

The long-established Owners Corporation Network has lobbied for this type of improved transparency, but Johnston argues that mere disclosure – the primary defence of the industry and the network (which takes industry sponsorship) – is a failed mechanism.

She said disclosure did not remove the inherent conflict. “Information can be disclosed yet incomprehensible, overwhelming, misleading, and simply not useful,” she said. More troubling, she cited studies showing that the act of disclosing a conflict can make people feel “ethical”, often leading them to give more biased advice.

In contrast, newer grassroots advocacy group Strata Owners Alliance has taken a hardline stance, labelling commissions an “ethically indefensible perverse practice”. The registered charity, which refuses all industry sponsorship, is demanding an outright legislative ban.

Alliance co-founder Adam Promnitz noted that even when committees sourced insurance independently, some managers used “lost commission” contract clauses to sting owners with a fee anyway.

“In 2026, strata managers taking any form of commission or payment from a supplier is completely inappropriate and every owner in Victoria should be furious this is happening,” he said.

Apartment Advocacy Australia’s Sam Reece echoed the call to ban them, saying high-density living “was our future” and laws needed an overhaul. “Apartment owners have spoken up and there is an indication that change is required,” she said.

While Johnston argues insurance is the most lucrative “low-hanging fruit” governments should target, her research also highlights a plethora of other conflicts which need to be tackled, including strata managers recommending “affiliated” maintenance companies, plumbers or legal firms that are subsidiaries of the management company itself, as well as the conflicts involved in developers appointing strata managers in new builds.

An industry fractured

The peak body representing the majority of strata managers nationally, the Strata Community Association, is also fractured on the issue. Last September, its NSW arm committed to a landmark phase-out of commissions by 2026 to restore “integrity and trust” and “show leadership”. However, just weeks later, after the industry’s largest firm, PICA Group, threatened to quit the association over the new stance, the NSW branch reframed the move as “voluntary”.

Strata Community Association Victoria has been reassuring its members that the NSW shift “does not alter the position in our state”, and in its submission to the state’s statutory review lobbied to keep the option for commissioned insurance policies as “consumer choice”, arguing that banning them would trigger a significant hike in the “sticker price” of management fees and drain management firms of a key revenue source. The association refused to provide further comment to this masthead.

Some strata management firms believe the shift to ban commissions is inevitable, including Brandon Koprivnjak, national operations manager at TSM Strata, whose firm began removing commissions from new contracts last year.

The Apartment Advocacy Australia survey showed Victorians were split on whether they would prefer a lower base fee with commissions for their manager or to pay a higher management fee knowing there were no conflicts.

In Koprivnjak’s case, his firm’s base management fees must rise by 20 to 30 per cent to compensate for the lost revenue, but he says owners corporations which have had bad experiences with managers taking kickbacks are usually happy to pay for transparency when they move to his company.

“You get the clients who are just shopping around for the cheapest price… but the ones who actually understand and are willing to pay for service and have that transparency,” he said.

He warned, however, that a ban needed to extend to brokers; otherwise, owners could still get stung if brokers pocketed the difference rather than passing on savings.

A crossroads moment

As the NSW government prepares to receive its own report on prohibiting commissions next week, all eyes are on Victoria’s upcoming strata laws revamp expected in the coming months.

Consumer Affairs Minister Nick Staikos said the government was “working to ensure the one in four Victorians who call a strata-managed property home are treated fairly”, and that an expert panel he commissioned had specifically been tasked to look at “dishonest business practices, unfair contracts, and inappropriate commissions”.

Opposition consumer affairs spokesman Tim McCurdy said the Liberals and Nationals believed strata insurance commissions should be banned, saying: “If managers deserve higher pay, it should be transparently agreed by owners, not funded through conflicted commission arrangements.”

“The question is not whether change will come,” Johnston said. “But whether it will be led by the industry or imposed upon it”.

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