New South Wales Archives

NSW Strata Commissions Review: What the Productivity Commission’s Final Report Means for the Industry

The NSW Productivity and Equality Commission (PEC) has today released its final report into strata manager commissions and it’s a significant moment for anyone involved in NSW strata management. The report follows a review commissioned by the Minister for Better Regulation and Fair Trading and signals that real structural change to how strata managers are paid is now firmly on the government’s agenda.

What the report says

The core finding is straightforward: commission-based payments to strata managers create conflicts of interest that don’t align with the interests of owners and renters. Owners can struggle to understand how these commissions affect the quality and price of the services they receive, and that lack of transparency makes it hard to assess whether their strata manager is acting in their best interests.

The Commission estimates that moving to a fee-for-service model could generate more than $300 million in net benefits for NSW over the next 15 years. The report also notes the broader context: within 15 years, nearly half of all homes in Sydney will be strata dwellings. This is a sector that only gets bigger.

The four options

Rather than prescribing a single path, the PEC has put four options to government:

Support industry to phase out insurance commissions voluntarily.
Prohibit strata managers from accepting any commissions.
Prohibit all commissions and restrict intermediary commissions further up the supply chain.
Prohibit percentage-based commissions but permit a regulated flat fee payment.

All four options share the same objectives: better aligning strata managers’ economic incentives with owners’ interests, enhancing transparency of remuneration, and protecting strata owners as consumers

The inclusion of Option 4, a regulated flat fee, is notable. It preserves some commission-like compensation while removing the percentage-based structure that creates the most obvious conflicts. It may prove to be the pragmatic middle ground the government lands on.

The supply chain question

One aspect of the report that’s easy to overlook is the PEC’s broader observation about the supply chain. Beyond ending strata managers’ direct commissions, the Commission considers there is a sound case to look more broadly at conflicts of interest and competition across the strata services supply chain. This suggests the review’s implications could extend well beyond insurance commissions and touch on how strata-related services are procured and priced more generally.

What’s already happened

This report doesn’t arrive in a vacuum. Since February 2025, new rules have required strata managers to disclose supplier connections, broker fees, and commissions — with penalties up to $110,000 for non-compliance. And SCA (NSW) has already moved: from 1 January 2026, members are encouraged to begin a voluntary transition away from the commission-based model toward an equivalent fee structure, phased over three years as existing management agreements are renewed.

In other words, the industry has seen this coming. The PEC’s final report is the last major piece before government decides whether (and how) to legislate.

What this means in practice

For strata owners and owners corporations, the direction of travel is positive. Greater transparency and clearer alignment between what strata managers are paid and what they deliver is good for governance and good for levy budgets.

For strata managers, the transition is real and it requires rethinking how fees are structured and communicated. Moving from a commission model to transparent, agreed fees means being able to articulate and price the value of the work — something that not all managers have had to do in the same way before.

For developers and their legal advisers, this is an important moment to review management agreement structures in existing and upcoming projects. Of the more than 400 strata management businesses estimated to operate in NSW, 37 manage a total of 5,000 or more lots each: the larger players will adapt quickly, but terms embedded in current management agreements and strata management statements may need revisiting as the regulatory landscape shifts.

Where to from here

The ball is now in the government’s court. The Minister has the report and the four options. Legislative reform (if it follows) will require careful drafting to avoid unintended consequences, particularly around the transition of existing management agreements and the treatment of commissions embedded in supply chain arrangements that strata managers don’t directly control.

We’ll be watching closely and will update clients as the government’s response takes shape.

View Final report – Strata commissions review

© Bugden Allen Group Legal Pty Ltd. This is general information only and not legal advice. Our team may have used AI to research and draft parts of this article, however it has been reviewed by members of our team. You should not rely on this information without seeking legal advice tailored to your specific circumstances.

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The Developer Bond Scheme: A New Safety Net for Apartment Buyers

Victoria’s construction landscape is set for a meaningful shift with the introduction of the Developer Bond Scheme (DBS) under the Building Legislation Amendment (Buyer Protections) Act 2025 (Vic).

At its core, the DBS is designed to restore confidence in apartment living—by ensuring there is money on the table if things go wrong.

What is the Developer Bond Scheme?

The DBS requires developers of apartment buildings over four storeys to lodge a financial bond before obtaining an occupancy permit.

This bond acts as a security fund, which can be accessed to rectify building defects identified in the early life of the building.

Bond value: 2% of total construction cost.
Held by: Building and Plumbing Commission.
Purpose: Cover the cost of defect rectification.

In simple terms: no bond, no occupancy permit.

How the Scheme Works

Bond Issuance

Before applying for an occupancy permit, developers must lodge the bond. The amount is calculated based on the project’s reported construction cost (used for the building permit levy).

Inspection Period

The scheme introduces a structured, two-stage defect inspection process:

First inspection (15–18 months post-occupancy):

An independent inspector assesses the building and reports defects to both the developer and the owners corporation.

If no defects are found → the bond is returned.
If defects are identified → the developer is given time to fix them.

Second inspection (21–24 months post-occupancy):

A follow-up inspection determines whether defects have been rectified.

If defects remain → a claim can be made by the owners corporation against the bond.

What Defects Are Covered

Under the Building (Developer Bonds) Regulations 2025 (effective 1 July 2026), the scheme captures a broad range of issues, including:

Defective building work in common property;
Defects within private lots;
Serious defects in any other part of the building.

This wide scope is a major win for apartment owners, significantly expanding the safety net compared to previous frameworks.

Why It Matters

For buyers and owners, the DBS introduces meaningful early-stage financial protection at a time when it matters most. One of the biggest concerns in apartment ownership has always been the risk of defective construction emerging shortly after completion. The DBS directly addresses this by ensuring there is a financial mechanism in place to fund rectification works, reducing reliance on lengthy disputes and giving owners greater confidence in the quality, and accountability, of new developments.

For developers, the introduction of the DBS represents a notable shift in both financial and operational expectations. The requirement to lodge a bond prior to obtaining an occupancy permit means that capital will be tied up at a critical stage of the project lifecycle, potentially impacting cash flow and financing arrangements.

Beyond the financial implications, the scheme also brings increased scrutiny to construction quality. With independent inspections built into the process and a clear pathway for claims against the bond, developers face greater accountability for defects that emerge in the early years of a building’s life.

In practice, these added pressures may lead to more conservative project planning, tighter quality control, and, in some cases, upward pressure on sale prices as developers seek to offset the additional costs and risks introduced by the scheme.

Limitations

While the DBS is a significant step forward in strengthening consumer protection, it is not a complete safeguard against all building risks. The bond itself is limited in both value and duration, set at 2% of construction costs and only accessible within a relatively short post-completion window.

Importantly, the scheme does not prevent defects from occurring, nor does it provide long-term structural protection. Its role is reactive rather than preventative, addressing issues only once they have already emerged.

There is also the practical reality that, for large or complex developments, the cost of rectifying major structural defects may far exceed the value of the bond. In such cases, Owners Corporations may still be left exposed to significant financial shortfalls once the bond has been exhausted.

This article was first published on March 30, 2026 and was written by Julia Moroz, Partner and James Cooper, Paralegal , in our Melbourne office.

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Latent Defect Insurance: A Longer-Term Safety Net

As Victoria continues to grapple with widespread building defects and declining consumer confidence, attention is increasingly turning to solutions that go beyond short-term protections. One such solution is Latent Defect Insurance (LDI), a product designed to provide longer-term, project-wide coverage for serious building issues.

Unlike the Developer Bond Scheme (DBS), which focuses on early defect identification and rectification, LDI is aimed at protecting against major defects that may not emerge until years after completion.

What is Latent Defect Insurance?

Latent Defect Insurance is a first-party insurance policy that provides coverage for structural and significant building defects for up to 10 years after completion.

It is typically arranged by the developer before construction begins and remains attached to the building, benefiting future owners and Owners Corporations.

At a high level, LDI operates as a no-fault insurance model. This means that if a covered defect arises, a claim can be made directly against the policy, without the need to establish fault or pursue lengthy litigation against builders or consultants.

How It Works

The LDI process begins well before construction and runs throughout the life of the project.

Before construction, an independent Technical Inspection Service (TIS) is engaged to oversee quality assurance. At the same time, the developer’s broker works with the insurer to assess the project and agree on policy terms, with an initial premium deposit typically required.

During construction, the TIS undertakes ongoing audits, reviewing key risk areas such as structural works, waterproofing, fire systems, and building services. These inspections are embedded within the construction process, providing continuous oversight rather than relying on post-completion checks.

Once construction is complete, the final inspection reports are submitted and the balance of the premium is paid. The policy then comes into effect, providing 10 years of cover for qualifying defects.

The Role of Technical Inspection Services

A defining feature of LDI is the involvement of the Technical Inspection Service.

Rather than stepping in after problems arise, the TIS acts as an independent quality auditor throughout the project lifecycle, reviewing design documentation, conducting site inspections, and reporting on construction quality across all major disciplines.

While the TIS does not have the power to direct or stop construction, its presence introduces an additional layer of scrutiny that can significantly improve build quality and reduce the likelihood of defects emerging later.

Why It Matters

For apartment owners and Owners Corporations, LDI offers a fundamentally different type of protection. It provides long-term financial security for serious defects, without the need to rely on the solvency of the builder or pursue complex legal claims years after completion.

For developers, LDI can act as both a risk management tool and a market differentiator. Projects backed by LDI may benefit from increased purchaser confidence, particularly in an environment where trust in new apartment construction remains fragile.

There is also evidence that the involvement of independent inspection services can materially improve construction outcomes, reducing defect volumes and associated rectification costs over time.

LDI vs Developer Bond Scheme

While both LDI and the DBS are aimed at addressing building defects, they operate in fundamentally different ways.

The DBS provides short-term financial security, focused on identifying and rectifying defects within the first two years of a building’s life.

By contrast, LDI offers long-term insurance coverage, extending up to a decade and responding to more serious or latent defects that may only become apparent over time.

In many respects, the two mechanisms are complementary: the DBS addresses early-stage defects, while LDI provides ongoing protection well beyond the initial post-completion period.

The Bottom Line

LDI represents a shift toward proactive, lifecycle-based risk management in construction.

While it introduces additional upfront costs and oversight, it offers a level of long-term protection that traditional mechanisms have struggled to provide. As regulatory reform continues and expectations around construction quality evolve, LDI is likely to play an increasingly important role in restoring confidence in the apartment sector.

This article was first published on March 30, 2026 and was written by Julia Moroz, Partner and James Cooper, Paralegal , in our Melbourne office.

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Q&A: During a roof replacement, can owners choose not to reinstall their common property skylight? Is the body corporate liable to replace them later if a future owner complains?

Question: During a roof replacement, can owners choose not to reinstall their common property skylight? Is the body corporate liable to replace them later if a future owner complains?

We are owners in a 6-unit strata complex in FNQ. We need to replace our metal roof due to rust damage and have just held an EGM to obtain authority from the owners for a special levy to help cover the cost of the new roof.

All six units have skylights in the top-floor bathroom. Four owners do not want a new skylight installed, saving $750. Two owners would like the skylight replaced, with the additional $750 added to their special levy.

At the EGM, our strata manager advised that lawfully, owners cannot have the skylights removed without holding an EGM. All owners must agree, as the skylights are considered common property.

Also, the strata manager advised that if an owner chooses not to have the skylight replaced and they sell their unit, the new owner can complain that they don’t have a skylight and the body corporate is responsible for retrofitting a new skylight, as it was part of the original plan.

Is our strata manager correct?

Answer: The treatment of the costs and the level of approval required flows from where the skylights are located relative to the boundary between the lot/s and the common property.

Skylights tend to be a polarising issue; owners typically love them or hate them. As with any issue of this nature, the body corporate should seek legal advice.

The treatment of the costs and the level of approval required flows from where the skylights are located relative to the boundary between the lot/s and the common property.

The relevant upper boundary of a lot is the mid-point of the ceiling. Where skylights are of the ‘tube’ or tunnel type, with diffusers in the ceiling, the skylight itself, located on the rooftop, will typically be common property and owned by, as well as the maintenance responsibility of, the body corporate.

If the skylights are part of the ceiling, they will usually be part common property and part of the lot as they straddle the boundary. In this case, the skylights will be jointly owned by the body corporate and the lot owner, but the maintenance responsibility of the body corporate on the basis that they are a ‘roofing structure providing protection’.

Where the skylights are common property only, removing them is an ‘improvement to the common property by body corporate’, which would usually require only either a committee resolution or an ordinary resolution at a general meeting. Only a brave body corporate would remove skylights, in this case, without the consent of the affected lot owners. Lot owners who were dissatisfied with such a body corporate decision could, and likely would, go looking for factors that would invalidate the body corporate decision, for example and without limitation, based on compliance with development approval (building approval) conditions or bylaws.

Where the skylights are part common property and part of the lot, it is clear that installing larger skylights will take a resolution without dissent; see one of my cases, relating to enlarging penthouse windows overlooking the Coral Sea in Dansur v Body Corporate for Cairns Aquarius CTS 1439 & Anor [2022] QCATA 15. (Actually spelt ‘Danseur’).

It is less clear whether a resolution without dissent would be required to remove the skylights and replace them with roof sheeting.

It is a common misconception that the Dansur case is authority for the proposition that if you remove an existing part of the building and throw it away, you are ‘disposing’ of part of the common property. You need a resolution without dissent for that. That analysis is not correct. It is true that in Dansur, part of an external wall and the old window were ripped out and thrown away, but the relevant ‘disposal’ was not the act of throwing the building material away.

The ‘disposal’ was the creation of a new right, enjoyable only by the penthouse owner, to a larger view through a larger window, out to the Coral Sea. No other lot owner could enjoy that right, and any activity on the external surface of the building would have interfered with the right, and no doubt would have been challenged by the lot owner; after all, if the new, bigger window was (partly) painted over, what would be the point of having the larger window!

So, when a skylight is taken away and replaced with an ordinary roof, part of the lot owner’s property is being thrown away. A prudent body corporate would want the lot owner’s consent before proceeding (lest the body corporate invite prosecution for wilful damage and/or a civil claim in trespass!). As far as the approval to do the work, however, it’s hard to see why the replacement of the skylight would be anything more than an improvement to the common property (maximum level approval required being an ordinary resolution) with an additional bit of work to the lot (usually to be paid for by the lot owner).

Finally, I would recommend that this body corporate take advice, not only in relation to the level of approvals required, but also what appears to be ‘differential’ special levies. There are very few ways that just some owners can be levied for things instead of all lot owners. The ‘saving’ generated from not installing a new skylight is very unlikely to be a saving for the lot owner, as opposed to the body corporate. Likewise, the cost of new skylights to replace the old is very likely to be a body corporate cost and not a lot owner cost.

This article by Queensland Partner Michael Kleinschmidt and Paralegal Evelyn Hearn first appeared in August 2025 edition of The QLD Strata Magazine from LookUpStrata Pty Ltd.

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NSW Strata Updates: 5 Key Changes

There have been several important regulatory updates affecting strata communities and managing agents across New South Wales. From new disclosure enforcement measures and digital tools in Strata Hub, to fire safety obligations and upcoming changes to strata commissions, staying across these developments is essential. Here is a summary of what you need to know.

Disclosure Obligations for Strata Managing Agents: NSW Fair Trading’s Regulatory Intent

NSW Fair Trading has published a Statement of Regulatory Intent outlining its compliance and enforcement approach to certain disclosure obligations that strata managing agents owe to owners corporations. These obligations are designed to ensure owners corporations receive timely and transparent information about a managing agent’s supplier connections and training benefits.

Under the obligations, a strata managing agent may accept training services provided or paid for on their behalf — provided this is included in the agency agreement or otherwise approved by the owners corporation. The Statement clarifies NSW Fair Trading’s approach to enforcing compliance, including:

The types of scenarios where NSW Fair Trading does not consider approval or disclosure to be required
Its enforcement approach to other types of free or paid training provided to agents

Strata managing agents should familiarise themselves with the Statement and ensure all staff responsible for disclosure obligations are adequately trained and supervised.

Enforcement outcomes to date:

As part of its compliance efforts, NSW Fair Trading has conducted audits of more than 190 managing agents, resulting in:

36 penalty infringement notices issued
61 warning letters sent to managing agents

NSW Fair Trading has made clear it will take a zero tolerance approach where managing agents fail to meet their disclosure obligations.

New Digital Tools Launched in Strata Hub

Strata Hub has released new digital tools to help support strata communities, particularly those that are self-managed or looking to streamline key administrative processes.

Capital Works Fund Planner

From 1 April 2026, the use of the prescribed form for capital works fund plans will be mandatory. To assist with compliance, Strata Hub has released a new digital planner that allows strata schemes to build a 10-year capital works fund plan and automatically format it into the prescribed form. Key features include:

Customisable schedules of items for repair, maintenance, or replacement
Cost estimates with inbuilt calculations to account for inflation and contingencies
Automatic formatting into the required prescribed form

This tool is particularly useful for self-managed schemes that may not have access to professional planning support.

Strata Manager Finder

Strata Hub has also launched an online directory designed to help strata committees find licensed strata managing agents in their area. The directory includes:

Contact details and service information for listed managing agents
Any compliance history associated with the agent

Strata managing agents can use the directory to showcase their services and generate new business by completing their business profile on the platform. Strata committees can also use the downloadable Strata Managing Agent Engagement Planner to compare agents and select the right fit for their scheme.

New Fire Safety Requirements for Apartment Buildings

From February 2026, apartment buildings are required to have their fire safety systems regularly inspected and tested in accordance with the Australian Standard AS1851. This requirement applies to building owners and owners corporations — meaning all unit owners in a building bear responsibility for compliance.

Strata committees should ensure:

A qualified fire safety practitioner is engaged to carry out inspections
Inspections are conducted in accordance with the requirements of AS1851

Non-compliance with the national standard can result in fines being issued to building owners and owners corporations.

Have Your Say: NSW Strata Commissions Review

The NSW Productivity and Equality Commission is seeking feedback on its issues paper for the Strata Commissions Review. This is an independent review examining the market impacts of prohibiting strata managing agents from receiving commissions and other forms of conflicted remuneration.

The issues paper sets out the current landscape of strata commissions and conflicted payments in the NSW strata industry, along with potential policy options to address them. Feedback is invited from all participants in the strata sector, including:

Owners and residents
Strata managing agents
Service providers operating in the strata industry

All submissions will be considered in the analysis of potential policy impacts. This is an important opportunity for strata stakeholders to help shape the future regulatory framework governing commissions in the industry.

For more information and to make a submission, visit nsw.gov.au.

Mandatory National Police Checks for Conveyancer Licence Applications

NSW Fair Trading is introducing mandatory National Police Checks (NPCs) for all conveyancer licence applications, as part of its commitment to strengthening trust and transparency in the property industry. The key changes include:

Improved identification of criminal history: NPCs will allow for accurate and consistent identification of relevant criminal history across applicants
Stronger consumer protection: The requirement is designed to prevent applicants with serious or undisclosed criminal histories — particularly those involving dishonesty or fraud — from obtaining a licence
Secure processing platform: NPCs will be processed through a secure, authentic government platform integrated with NSW Police

These changes reflect a broader effort to ensure that consumers dealing with conveyancers can have confidence in the integrity and probity of licence holders.

For further information or to apply, visit the NSW Fair Trading website.

The regulatory environment for strata communities in NSW continues to evolve. If you have questions about how these updates affect your owners corporation, strata committee, or managing agency, our experienced strata lawyers are here to help.