Strata reform failure leaves apartment owners at the mercy of predators
A year ago when then-Consumer Affairs Minister Nick Staikos announced a review of the laws governing business owners’ businesses, he was clear about its aims.
The three-expert panel, chaired by Marsha Thomson, one of his predecessors at the ministry, was supposed to look at “dishonest business practices, unfair contracts and improper kickbacks”; The ultimate aim was to “ensure that the one in four Victorians who call a strata-managed property home are treated fairly”.
So the Allan government knows that the current system does not provide justice to strata owners in general.
Last year alone, our reporter Rachael Dexter revealed management companies in the $471 billion Victorian sector were charging illegal “administrative” and “debt collection” fees; they pocket secret commissions of up to 20 percent from the insurance companies they offer to apartment owners, a perfectly legal practice at the moment; and recently an employee of one of the country’s largest strata management firms is scrambling to get a kickback on a contract bid.
Since the Proprietors’ Companies Act was enacted in 2006 by the Bracks government, where Thomson was a minister, the number of companies has increased from 65,000 to 128,896 in 2024; During the same period, the number of parties increased from 480,000 to 1,044,400. It’s a sector where more and more people are expected to move as governments encourage medium- and high-density living.
When content of the review – submitted to the Allan government six months ago – was finally published this week and contained some welcome advice. The panel called for a ban on commissions given to line managers of insurance companies and the replacement of such payments with a fee-for-service model. He also said that if strata properties are used as Airbnbs, the law should be “amended to clearly address the issue of parties” retained in the properties.
Above all, the panel concluded that Victoria’s current regulatory framework, overseen by Consumer Affairs Victoria (CAV), was inadequate. Pointing to the conclusions of the Hayne Royal Commission into the banking sector, the panel argues that it is not good enough to rely on the explanations of strata management firms; “Prohibitions are necessary to prevent harm.”
The review made clear that CAV had failed to implement even a single enforcement measure and had not canceled any strata manager registrations since 2019, despite thousands of complaints and requests for help from owners each year. It also shows that the burden of pursuing cases of fraud often falls on the owners’ companies and residents, in a process described as “long, expensive and burdensome.” It concludes that CAV and the Victorian Civil and Administrative Tribunal do not have the necessary authority to penalize companies that go astray.
The government’s response, published at the same time as the report, is a complete disappointment. The issue of hosting parties in Airbnbs has been glossed over, with new Consumer Affairs Minister Paul Edbrooke warning of “excessiveness”.
On insurance, the number one expense for business owners, the government has delayed talk of a kickback ban, which the review described as creating a systematic conflict of interest that drives up business owners’ premiums, arguing that “the ban could have potentially powerful effects on the market”.
Age He believes that the minister’s first responsibility is to consumers (in this case property owners and therefore tenants), not to companies trying to protect dubious revenue models. When Dexter questioned the minister about the need for further analysis of insurance commissions, given the work the New South Wales Productivity and Equity Commission has already done on this issue, Edbrooke suggested that these conclusions were somehow only valid in that state.
We reject this claim. Strata management firms operate across the country and the industry body in NSW has said it is already prepared. phase out insurance commissions.
The minister’s reaction to the regulation was even more worrying. We fail to see how he can convincingly argue that “I have no evidence that Consumer Affairs did not do its job properly” when he had the investigation report in hand. The review identifies just seven penalty provisions in Victoria’s Freeholders Corporations Act, compared to more than 75 in New South Wales. Our northern neighbors are independent commissioner We have been pursuing problems in the sector since 2023.
Age He believes the way forward is a proactive approach that puts the burden on managers to do the right thing. In the words of Sam Reece, 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 needed.”
When Edbrooke tells us that “most [owners’ corporations] We wonder if he fully understands who’s who in his portfolio, as he did at a press conference this week. It is managers, not owners, whose behavior raises immediate concern.
The government wants Victorians to embrace apartment living. This week he had the chance to reset the rules and protections they live under. Instead, it has jettisoned important reforms and left strata owners unnecessarily vulnerable in a world where predatory practices can continue unchecked.
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