The Victorian government will further analyse commission payments and other benefits paid to strata managers after an expert panel recommended their prohibition.

The state says it supports in principle the need to more strongly regulate the role owners’ corporation (OC) managers play in procuring third-party goods and services, and notes current disclosure is often ineffective.

It will consider strengthening disclosure obligations and ensure serious consequences for non-compliance, but says a proposed payments ban could have market effects including increasing service fees.

“Further work and analysis will be undertaken to determine the impacts of imposing a ban on OC managers and other related entities from receiving financial benefits or other rewards from third parties,” the government response to the panel’s report says.

A recommendation to adopt John Trowbridge’s invoice transparency model, introducing standardised line-item disclosure, will also be examined.

Proposals the government has supported include legislating a licensing system to regulate and professionalise the strata management sector.

State Consumer Affairs Minister Paul Edbrooke says the one in five Victorians living in strata properties “deserve a fair go”.

“If you’re a strata manager taking kickbacks and illegal commissions, you are squarely in our sights,” he said.

The expert panel – appointed in June last year to review the Owners Corporation Act – delivered 51 recommendations to the government in December.

Its report was released today along with the response.

The remuneration proposal says an OC manager and any related entity should be banned from receiving a financial benefit or reward in any dealing regarding their duties and functions, other than through fees for services specified in contracts.

The report says the proposal should include commission components, broker fee components and any future remuneration structures that could create conflicts.

“However, to avoid unintended impacts on insurance brokers, the ban should not prohibit brokers from receiving commissions (consistent with the NSW model),” the panel says.

Since the panel completed its work, the NSW Productivity and Equality Commission has proposed extending a commissions ban up the supply chain, including to insurance brokers.

The Victorian report says commissions paid to OC managers “embed and crystalise conflicts of interest” and undermine trust and transparency.

“Conflicts of interest are systemic, with commissions and related-entity arrangements distorting incentives and ultimately leading to suboptimal outcomes,” it says.

The government supports 17 recommendations in full, three in part and 26 in principle. Three will be given further consideration and two are not supported.

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From the latest Insurance News magazine: "A nested doll of self-interest." Consumer advocates are on the attack as NSW's strata reforms target broker remuneration

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