The report was commissioned by NSW Fair Trading as part of its broader investigation into Netstrata, following public concerns the strata management company was charging excessive fees, and not disclosing conflicts of interest and referral commissions.
After reviewing a sample of 60 strata plans managed by Netstrata, McGrathNicol identified potential breaches by Netstrata of the Strata Schemes Management Act 2015 including:
- Seven instances of failing to obtain at least two quotes for expenses exceeding $30,000, in contravention of section 102.
- Two instances of non-disclosure of commissions received by Netstrata, in contravention of section 60.
- Possible breaches of section 60 in relation to non-disclosure of commissions received by Netstrata from a third-party service debt collection agency, Strategic Collection Services Pty Ltd.
In addition, McGrathNicol identified:
- Several potential conflicts of interest not disclosed by Netstrata to its clients including the personal relationships that employees of Netstrata had with suppliers.
- Highly saturated use of those related entity suppliers or suppliers with whom Netstrata had a commercial arrangement.
- Other practices that could be considered not in the best interests of the consumer, including:
- charging a premium to strata plans who did not use Netstrata’s wholly owned insurance broker, Strata Insurance Services (SIS).
- a remuneration structure which arguably incentivises its strata managers to bill for add-on charges (Schedule B charges).
Since the review commenced, the NSW Government has strengthened strata laws with significant reform focused on transparency and accountability. The McGrathNicol review did not consider Netstrata’s actions under these new laws.
The McGrathNicol review is only one component of NSW Fair Trading’s broader review into Netstrata. Fair Trading is examining matters not considered by McGrathNicol relating to other separate allegations of misconduct. This includes complaints from impacted strata schemes. The Netstrata investigation is being led by Fair Trading’s newly established Strata and Property Taskforce.
Download the McGrathNicol report
Read more about the Enforceable Undertaking establishing the review on the Fair Trading website.
Quotes from NSW Fair Trading Commissioner, Natasha Mann
“At the heart of this matter is that strata managers have a legal duty to act in the best interests of the people they work for – the owners’ corporation.
“The disturbing practices described in this report suggest that Netstrata does not appear to have always done this. On multiple occasions, Netstrata’s own interests appear to have trumped the interests of the people it had a duty to act on behalf of.
“I thank McGrathNicol for its report which will assist Fair Trading in our ongoing investigation into Netstrata.”
