This was a hotly debated issue before the last change to our strata laws.
The commission was about to be wiped until it was pointed out by some of the small “mum and dad” strata management companies that, without the commission, they would go under.
It’s not just a a case of them having a bad business model – the strata managers based in your local real estate office (for instance) service small local strata schemes in a way that the big companies can’t or won’t, for the simple reason that small schemes require almost as much work as large ones but the strata manager charges on a basis of a fee per unit per annum.
Some of the larger companies don’t take the commission or declare it as a contribution to reduced fees.
The insurers argue that having a middle person – a strata manager or an insurance broker – means they don’t have to “train” the strata committee every time they want to make a claim. That’s why if you negotiate the premium yourself, you don’t get the trailing commission refunded to you.
It sounds as dodgy as hell, but it kind of works.