I recently read Nicole Johnston’s landmark report, At the Crossroads: Addressing Pervasive Conflicts of Interest in Strata Management, and I believe it’s essential reading for anyone involved in strata, whether you’re an owner, committee member, or industry professional.
The Heart of the Problem
The report lays bare what many of us have suspected for years: conflicts of interest are not isolated incidents in strata management, they are systemic, deeply embedded in the industry’s business models. The most striking finding for me was that the current reliance on disclosure regimes has created what Nicole calls an “illusion of transparency”. In other words, simply declaring commissions or relationships does not help owners understand the real impact on their fees, nor does it protect their interests (such words some of my colleagues do not want to hear).
Key Findings from the Report
- Disclosure is Not Enough: The report demonstrates that disclosure, as currently practised, often fails to deliver genuine transparency or protect owners from conflicted arrangements.
- Commission-Dependent Models: Many strata managers claim, “We don’t earn commission!” – yet the reality is that their remuneration is often subsidised through other means, cleverly hidden in the fine print or buried within complex disclosures that are nearly impossible for owners to decipher. These alternative incentives can be just as misaligned with owners’ best interests as traditional commissions.
- Cross-Subsidisation: Larger or more complex schemes often end up subsidising others, with little clarity or fairness.
- Affiliated Entities: Relationships with brokers, suppliers, and even developers can create hidden costs and erode trust.
- Owners Left Behind: Even highly educated committee members struggle to understand the true nature of these arrangements.
The Path Forward
Nicole’s recommendations are clear and, in my view, absolutely necessary:
- Ban insurance commissions (including for brokers), and move to transparent, fee-for-service models.
- Prohibit initial management appointments for companies providing developer consulting.
- Restrict dealings with affiliated entities and require independent oversight.
- Reform delegated authority processes to ensure owners have real control and oversight.
Why This Matters
Reform will be disruptive; there’s no denying it. But as the report highlights, early adopters are already proving that ethical, transparent business models can succeed (hand raised!). Owners deserve to know exactly what they’re paying for, and to have confidence that their managers are acting solely in their best interests.
My Recommendation
I strongly encourage all my clients, colleagues, and anyone involved in strata to take the time to read this report. It’s a wake-up call and a roadmap for positive change. If you’re interested in discussing how these findings might affect your scheme, or how we can work together to implement best practice, please get in touch.
Congratulations to Nicole on this important and timely research. With her permission, I’ll be sharing more insights from the report in future posts and discussions.
Yours in strata,
JM