Lehane highlighted that the aged care industry experienced a decline in profitability, leading to an exodus of skilled professionals and investors, which ultimately resulted in deteriorating services and government intervention. He warned that the strata management sector could face a similar trajectory if insurance commissions are removed without implementing alternative revenue models.
The warning comes amidst ongoing reforms by the New South Wales Government, which include exploring the removal or replacement of insurance commissions. Lehane pointed out that the strata management industry has already been grappling with declining profit margins due to increasing costs, stagnant management fees, and the growing complexity of strata schemes and legislation.
To gauge the sentiments of strata owners, PICA Group conducted a survey across New South Wales, Victoria, and Queensland. The findings revealed that 71% of respondents did not want their strata management fees to be impacted. Among them, 34% supported maintaining current commissions to help offset management fees, 38% preferred a fixed insurance fee paid by the insurer, and 29% favored removing insurance commissions and increasing management fees.
Lehane emphasized that the majority of owners are resistant to cost increases, which could be an unintended consequence of rapid changes to the current remuneration structure. He also noted that as more Australians turn to apartment living amidst the cost of living crisis, the importance of a stable and viable strata management sector becomes even more critical.
In conclusion, while the push for transparency and reform in the strata industry is essential, stakeholders must carefully consider the potential impacts of removing insurance commissions. Ensuring the financial sustainability of strata management firms is crucial to maintaining the quality of services provided to property owners and residents.
