Insight
Strata Managers: Contracts, Duties and Legal Risk
24 Oct 2026
In short
Strata managers operate under strict state statutory licensing regimes, fiduciary duties, and Australian Consumer Law obligations. Compliance requires transparent commission reporting, enforceable agency contracts, and rigorous contractor procurement protocols.
Strata managers operate in an increasingly scrutinised regulatory environment where fiduciary principles intersect with state-based property statutes and federal commercial law. Delivering strata management services requires strict governance around agency agreements, broker commissions, trust accounting, and contractor procurement. Managing these operational risks requires a clear understanding of where common contractual arrangements conflict with statutory duties and consumer protection law.
Regulatory frameworks governing strata management appointments
Strata managers do not act with unrestricted executive authority; their legal powers derive strictly from state and territory legislation and the terms of their agency agreement. In New South Wales, the relationship is governed primarily by the Strata Schemes Management Act 2015 and the Property and Stock Agents Act 2002. In Victoria, managers operate under the Owners Corporations Act 2006, while Queensland relies on the Body Corporate and Community Management Act 1997. Each jurisdiction imposes distinct licensing regimes, mandatory delegations, and caps on appointment durations.
An appointment is invalid if the formal statutory procedures for convening meetings and passing resolutions are not strictly adhered to by the owners corporation or body corporate. A defect in the convening notice, lack of a required quorum, or failure to pass a special or ordinary resolution as required by statute can invalidate the strata management contract from its inception. Managers who continue to issue instructions, incur debt, or disburse funds under a defective appointment expose their business to restitution claims and statutory penalties.
To safeguard agency continuity, management agreements must precisely define the scope of delegated authority. While administrative and minor repair approvals are typically delegated, significant decision-making powers—such as raising special levies or initiating legal proceedings—often remain non-delegable statutory responsibilities of the committee or the scheme. Aligning the commercial terms of a service agreement with state-specific statutory delegations prevents challenges to the manager's actions by disgruntled lot owners.
Insurance commissions, broker fees and fiduciary conflicts
The practice of strata managers receiving insurance commissions, broker rebates, and third-party referral fees is subject to intense regulatory and public scrutiny across Australia. Under general agency law, an agent cannot accept a secret commission or place their personal financial interest in conflict with their principal's interests without fully informed consent. State strata statutes reinforce this common law principle through prescriptive disclosure rules.
In New South Wales, strata managers must disclose in writing before appointment, and at each annual general meeting, all commissions or training services they expect to receive in connection with insurance or other contracts placed for the scheme. Victoria requires managers to disclose any beneficial relationships or commissions exceeding statutory thresholds before contracts are entered into. Failure to provide granular, contemporaneous disclosure of insurance commissions undermines the validity of the agency arrangement and can expose the management company to mandatory refund orders and disciplinary sanctions by state fair trading bodies.
Relying on broad or boilerplate disclosure clauses in annual meeting packs is legally hazardous. Disclosures should detail the precise percentage or dollar amount received, the insurer or broker providing the payment, and the specific administrative work undertaken to justify the commission. If an owners corporation requests that commissions be rebated against the management fee, agencies must ensure their billing and invoicing structures reflect this variation transparently to avoid breach of fiduciary duty allegations.
Unfair contract terms in strata agency agreements
Strata agency agreements are standard-form commercial contracts, and they frequently fall within the scope of the statutory unfair contract terms regime under the Australian Consumer Law. The Australian Competition and Consumer Commission (ACCC) actively scrutinises business-to-business standard contracts that create significant imbalances in parties' rights.
Clauses commonly found in legacy strata agreements that present serious regulatory risks under the unfair contract terms regime include:
- Automatic rollovers: Clauses that renew the agreement for a multi-year term if the scheme fails to give notice within a narrow window.
- Asymmetric termination rights: Provisions permitting the manager to terminate immediately for minor non-compliance while restricting the owners corporation's right to terminate for substantial default.
- Exorbitant handover fees: Surcharges or administrative exit fees that exceed the reasonable cost incurred by the outgoing manager to transfer physical and digital records.
- Exclusion of liability: Sweeping indemnities that shield the strata manager from liability for gross negligence or statutory breaches.
Under federal reforms, the inclusion of an unfair term in a standard-form small business contract is unlawful and attracts substantial civil penalties. Strata agencies must review their standard terms to ensure reciprocal rights, transparent renewal procedures, and termination provisions linked reasonably to actual performance failures.
Comparison of key state strata regulatory frameworks
Understanding the statutory variances across major Australian jurisdictions is essential for strata management businesses operating nationally or contemplating expansion. Legal requirements under state statutes and federal legislation accessible via Federal Register of Legislation dictate distinct compliance workflows.
| Jurisdiction | Core Governing Legislation | Statutory Cap on Term | Mandatory Commission Disclosure |
|---|---|---|---|
| New South Wales | Strata Schemes Management Act 2015 | 3 years (1 year if appointed at first AGM) | Detailed written disclosure in advance and reported at every AGM |
| Victoria | Owners Corporations Act 2006 | 3 years | Mandatory disclosure of commissions, rebates, and commercial relationships |
| Queensland | Body Corporate and Community Management Act 1997 | 3 years (Standard Module) or module-specific cap | Mandatory disclosure of monetary benefits and insurance commission percentages |
Operating a standardised national contract without state-specific schedules routinely causes non-compliance. Agencies must localise their operational contracts and disclosure protocols to the particular property statutes of the jurisdiction in which the managed asset sits.
Managing procurement and third-party contractor risk
Strata managers routinely procure services on behalf of owners corporations, ranging from routine gardening and lift maintenance to major structural rectifications. In engaging third-party contractors, the legal capacity in which the manager signs documents must be unequivocally documented. When executing a trade agreement, the manager should execute explicitly as agent for the owners corporation, identifying the specific strata scheme number. Executing contracts without this agency distinction can expose the strata management company to direct liability for contractor claims, invoices, and site-related disputes under general business contracts law.
Work health and safety (WHS) laws impose a non-delegable duty of care on persons conducting a business or undertaking. While the primary statutory duty regarding common property often falls upon the owners corporation, strata managers can share concurrent duties if they exert management or control over the workplace. If an agency engages an unlicensed, uninsured contractor who causes property damage or personal injury, the strata manager risks statutory prosecution and negligence cross-claims alongside the owners corporation.
Strata managers should operate automated contractor compliance systems. Before issuing any work order, the agency must verify that the contractor holds current public liability insurance, appropriate workers' compensation policies, and the necessary statutory trade licences. Relying on contractor self-certification without active verification exposes the agency to third-party liability if claims exhaust policy limits.
Practical steps to audit strata agency operations
Mitigating legal, regulatory, and contractual risk within a strata management portfolio requires systematic oversight. Strata businesses should execute the following operational steps across their client base:
- Audit all existing agency contracts: Review every active agreement to verify that the term has not expired, that any extension was validly resolved at a general meeting, and that roll-over clauses comply with unfair contract terms laws.
- Standardise commission reporting: Implement a mandatory template for insurance commission disclosures that itemises the dollar amount, broker splits, and specific services provided for each scheme before AGM packs are distributed.
- Update contractor engagement protocols: Ensure all work orders and contractor tenders state that the engagement is entered into solely as agent for the identified owners corporation, with no agency liability.
- Establish a licensing and delegation matrix: Confirm that staff issuing notices, approving repairs, or handling trust transactions hold appropriate statutory individual licences and delegated authorities.
- Formalise dispute handling mechanisms: Introduce a clear internal complaints escalation procedure to resolve committee grievances before they escalate into formal applications to state civil and administrative tribunals.
Frequently asked questions
Can an owners corporation terminate a strata manager immediately for poor performance?
An owners corporation cannot terminate a management agreement immediately without cause unless the contract or state legislation explicitly provides for it. Immediate termination usually requires proving gross misconduct, fraud, or a fundamental breach of statutory duties. Where the contract contains a dispute or remedy clause, the owners corporation must issue a formal default notice allowing reasonable time to cure the defect.
Are strata managers legally responsible for common property defects?
Strata managers are not directly responsible for common property defects, as the statutory duty to repair and maintain common property rests with the owners corporation. However, a strata manager may face liability if they fail to notify the committee of reported safety hazards, fail to act on urgent maintenance within their delegated authority, or engage uncredentialed contractors whose work exacerbates the damage.
What occurs if a strata agency agreement contains an unfair contract term?
Under the Australian Consumer Law, if a court finds a term in a standard-form small business contract unfair, the term is void and unenforceable. The court may also order substantial civil monetary penalties against the business that proposed or relied upon the term. The remainder of the agency agreement continues to bind the parties only if it can operate without the offending provision.
Can a strata manager accept insurance commissions under Australian law?
Strata managers can accept insurance commissions provided they comply with state disclosure laws and agency principles. This generally requires full written disclosure of the commission amount, the source, and the basis of calculation to the owners corporation prior to entering the policy, followed by confirmation at each annual general meeting. Undisclosed commissions can breach fiduciary duties and state property agent legislation.
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