Strata Managing Agents Amendment Bill 2024

On Wednesday 14th August 2024 Parliament tabled the Strata Managing Agents Legislation Amendment Bill 2024 which introduces several significant changes to the existing legal framework governing strata managing agents. The Bill proposes amendments to various Acts and regulations related to strata management, focusing on increasing penalties for non-compliance, enhancing disclosure requirements, and tightening regulations around commissions and training services.

The Bill represents a concerted effort by the New South Wales government to enhance the regulation of strata managing agents, promoting greater transparency and accountability in the industry. The legislation introduces additional regulatory tools, such as enforceable undertakings, to address potential conflicts of interest and ensure more transparent insurance processes.

These changes are designed to better protect owners corporations, and lot owners from potential exploitation or mismanagement while also providing clearer guidelines and expectations for the agents themselves. Below is an overview of the key provisions:

Strata Schemes Management Act 2015 amendments

Definitions & penalties

• Introduces a “commission” definition, which includes insurance broker fees.
• Significantly increases the maximum penalties for certain offences. For corporations, penalties increase to 500 penalty units, and for individuals, to 100 penalty units.

Approvals & disclosures

• Mandates that an owners corporation may only give approval relating to commissions or training services provided to strata managing agents, by (ordinary) resolution at a general meeting.
• Requires detailed disclosures accompanying such resolutions, including the nature of relationships, monetary values, and justifications for why the approval is in the owners corporation’s best interest.

Reporting requirements

• Expanded annual reporting obligations to include disclosures about suppliers or original owners who have become connected with the agent.
• Introduces new requirements for agents to provide written notice before entering into contracts involving commissions or connected parties.
• Requires that managing agents must promptly inform the strata committee of any changes to commissions or training services from those disclosed at the AGM, explaining the variation and its reasons.

Insurance quotations

• The law mandates that strata managing agents provide at least three insurance quotations or explain in writing why this isn’t possible.
• Requires detailed breakdowns in insurance quotations, including base premiums, commissions, broker fees, and other charges.

Tribunal enforcement

• The Tribunal can order managing agents to repay undisclosed or inaccurately disclosed commissions or training services to the owners corporation, either in full or in part, upon application by the owners corporation.

Community Land Management Act 2021 amendments

• Introduces parallel changes to those made in the Strata Schemes Management Act, ensuring consistency across community schemes.

Property and Stock Agents Act 2002 amendments

Conduct & penalties

• Increases the maximum penalty for breaching rules of conduct to 1,000 penalty units for corporations and 200 penalty units for individuals.
• Introduces a new offence for requiring payment of commissions or expenses under prohibited provisions in agency agreements.

Regulatory powers

• Expands the Secretary’s power to appoint accounts examiners to investigate compliance with relevant Acts and regulations.
• Introduces provisions for enforceable undertakings, allowing the Secretary to accept written commitments from license or certificate holders to address non-compliance issues.

Property and Stock Agents Regulation 2022 amendments

Agency agreements

• Prohibits provisions in strata managing agency agreements that allow agents to require commissions for “prescribed purchases of insurance” (where the owners corporation arranges insurance without the agent’s assistance).
• Mandates that agreements must explicitly prohibit such commission requirements.

Penalties

• Increases penalty notice amounts for various offences under the Act.

Other amendments

• Makes consequential amendments to the Strata Schemes Management Regulation 2016 and the Community Land Management Regulation 2021 to ensure consistency with the primary Act changes.
• Expands the definition of “connected persons” in both regulations to include certain trust relationships.

How Strata + manages commissions and disclosures

Strata Plus is dedicated to maintaining a transparent and ethical approach within the strata management industry. From our establishment in 2001, we have consistently upheld a commitment to independence, ensuring that all of our operations are conducted without compromise. As a company solely focused on strata management, we maintain a clear boundary by not operating subsidiaries or engaging in undisclosed financial arrangements with maintenance service providers and insurance companies.

Our strict policy of non-exclusivity with insurance, maintenance, and other service entities is a cornerstone of our approach, eliminating potential conflicts of interest and guaranteeing that our decisions are made with our clients’ best interests at heart.

The appointed insurance brokers operate impartially, sourcing quotations from various insurance providers to ensure a fair and transparent selection process. Currently, these insurance options and any commissions or training provided to Strata + are presented to the strata committee for their review and approval. Once the reforms have been passed, options will be presented to the owners corporation at a general meeting. We will keep our clients informed of any changes to processes moving forward.

Feel free to reach out to your licensee should you require more information.