Debate resumed from an earlier hour.

Ms KYLIE WILKINSON (East Hills) (15:07): I strongly support the Strata Managing Agents Legislation Amendment Bill 2024. Strata living is of the utmost importance for the people of New South Wales. Currently, New South Wales has over 85,000 strata schemes, housing more than 1.2 million residents. With that number expected to grow, supporting confidence in investing and living in strata schemes is essential. Strata managing agents are an important contributor to the effective functioning of a strata scheme. Those licensed professionals offer specialised advice to owners' corporations about their responsibilities and oversee the provision of services to the strata scheme. Agents are also trusted advisors to the owners' corporations. They should be acting in their clients' best interests.

Recently, concerns have been raised about the transparency of strata managing agents. Those concerns include that agents are charging excessive fees and earning commissions when arranging strata insurance for the buildings they manage, potentially favouring products from specific companies due to the personal benefits they will receive, and engaging related entities for their services to gain financial advantage without the knowledge of owners' corporations. The bill addresses those concerns by strengthening the disclosure obligations of the strata industry.

Over the past decade, the strata industry has grown immensely and has become more complex. No longer are strata managing agencies simple suburban shopfronts that provide services to strata schemes. Many agencies are now large companies with subsidiaries providing services to the broader strata industry, whether that is building maintenance services or insurance products. Some of those subsidiaries are even based overseas, reflecting how the industry's business model is evolving and growing in complexity.

The existing disclosure requirements in the Strata Schemes Management Act already provide owners' corporations with important information about the actions of strata managing agents. The reforms in the bill build on those requirements to ensure owners' corporations are better equipped with the right information in a more timely way, at the right time, to make informed decisions about the management of their scheme. Firstly, the bill amends the Strata Schemes Management Act to clarify that the owners' corporation's approval of a commission or training service is to be by a resolution at a general meeting.

Additionally, agents will be required to provide a document containing specific information about the commission or training service to the owners' corporation at the relevant meeting. This information includes why the contract is in the owners' corporation's best interest, and details about the relationship between the agent and the service provider. The agent must also provide a statement explaining why they believe that they are complying with their obligation not to act for a client if their interests conflict. These additional requirements will encourage agents to carefully consider their obligations while also providing owners' corporations with valuable information to assess the agent's actions.

The bill also requires agents to give owners' corporations itemised insurance quotes that clearly set out key information. This information includes the base premium amount, not including any commission amounts, the commission amounts, broker fee amounts and who those amounts are ultimately paid to, as well as levy amounts that must be paid to the Government. With this information, owners' corporations can easily identify commissions that their agent may receive in such transactions and determine their preferred insurance policy.

To further increase transparency, the bill requires agents to disclose perceived conflicts of interests more frequently and in greater detail. Agents will have to give written notice to the owners' corporation before entering a contract to buy goods or services if the agent will get a commission or training service under the contract or is connected to the supplier. The written notice will need to include information about relevant matters such as the nature of the agent's relationship with the supplier and if the contract is in the owners' corporation's best interest.

The bill will also require agents to disclose more information at the annual general meeting, such as all of their related suppliers and the services or goods they provide, and their connections to the "original owner" of the strata scheme, such as if the developer of the strata scheme has formed family ties with the agent. Section 7 of the Strata Schemes Management Act sets out when a supplier or original owner is connected to an agent. For example, an agent is considered to be connected to their relatives. The bill ensures that all relevant relationships are captured by adding new categories of "connected persons". This includes where an agent is a trustee. In those circumstances, an agent will be considered connected to the trust's beneficiaries. Similar disclosure requirements will apply before the appointment of a strata manager. This will enable the owners' corporation to make an informed decision about who is best suited to manage their scheme.

I point out that these important changes to the Strata Schemes Management Act will be applied to the Community Land Management Act. This will ensure residents in community land schemes receive the same benefits. The New South Wales Government is committed to facilitating transparency and enhancing trust in the strata industry. The improved disclosure obligations proposed by the bill are imperative to achieving this vision. I commend the Minister for bringing introducing the bill to the House.

Ms LIESL TESCH (Gosford) (15:13): I speak in support of the Strata Managing Agent Amendment Legislation Bill 2024, which aims to strengthen the regulation of strata managing agents as well as promote greater transparency and accountability. The Central Coast is no stranger to strata living, with well over 4,500 strata schemes, which is only set to increase. The member for Wyong, and Minister for the Central Coast, is in the Chamber, and we both know that the number of strata and apartment dwellings on the Central Coast continues to rise quite rapidly.

In Gosford, high-rise living has arrived in the CBD. Earlier this month the Premier visited our community to celebrate the topping out of the area's first high-rise housing precinct, the stunning new building of Archibald by ALAND. The project alone will introduce more than 323 new apartments to the Gosford housing market. With higher density housing comes a reliance on strata schemes. Owners' corporations, which manage their strata scheme, often employ a strata managing agent to assist with responsibilities, including maintenance and repair of common property, financial management, and taking out insurance. The relationship between the owners' corporation and the managing agent is built on trust, with managing agents working in the best interests of their clients. However, it has been brought to the attention of the Minister and a number of members that unscrupulous strata managers have been acting unethically on behalf of their organisations, and the bill is designed to remove that unethical behaviour so that people cannot profit from managing strata buildings.

It is concerning and sad to hear that strata managing agents have been taking advantage of strata owners. This has included owners' corporations being charged excessive fees for insurance, agents preferencing companies or using a related entity to obtain a benefit—often without the owners' corporation's knowledge. People who move into a strata scheme do not necessarily have complex legal capacities. It is an onerous burden for people to participate in the strata management of their facilities on top of dealing with their everyday lives. It is also a costly venture. It is disgusting that these strata managers are taking advantage of owners within strata facilities. The proposed amendments are designed to protect owners' corporations from potential exploitation from managing agents, ensure that managing agents are acting in the best interest of the owners' corporation, and restore public confidence in strata management and their schemes.

I acknowledge that the Strata Schemes Management Act imposes duties and responsibilities on managing agents, such as limitations on accepting gifts and benefits as well as disclosure obligations. The bill will strengthen these transparency obligations by amending section 60 of the Act, which will increase how often and how much information managing agents must disclose to the owners' corporation. Further, in certain circumstances a managing agent must give written notice to the owners' corporation before entering into the contract for goods or services. Circumstances include if the agent is, under the contract, receiving a commission or training service or the contract is with a person connected to the managing agent.

Similar disclosure requirements will also apply to managing agents prior to their appointment. Amended section 71 of the Act will require agents to disclose to the owners' corporation if they use related suppliers when managing strata schemes or have given the original owner advice on the strata plans in the past two years. Those changes will not only increase transparency but also allow the owners' corporation to make informed decisions, as they have real-time relevant information. This will also improve the relationship between the owners' corporation and managing agents by showing that the managing agent is working in the owners' corporation's best interest.

The bill will amend the Property and Stock Agents Act to prevent managing agents from being paid insurance commissions where an owners' corporation has independently obtained their own insurance quotes and arranges the policy purchase without the managing agent. Penalties, compliance and enforcement powers will also be strengthened. Firstly, the bill will substantially increase the maximum penalty for breaches of the disclosure as well as doubling the on-the-spot penalty infringement notices. Agents found not acting in good faith and in the best interests of their clients will also be subject to increased maximum penalties. Secondly, Fair Trading's enforcement and compliance powers will be broadened under the Property and Stock Agents Act, giving Fair Trading the necessary tools to address noncompliance. The new penalty framework, along with improvements to Fair Trading's compliance and enforcement powers, is a strong deterrent against agent misconduct and will ultimately improve consumer protection and confidence.

Overall the bill is strengthening disclosure obligations of managing agents, increasing transparency for residents and creating a system that will allow owners' corporations to make informed decisions about the management of their schemes and homes. The bill is just another step that the New South Wales Government is taking to empower and improve the lives of those living in strata schemes. I thank the Minister and his team for putting this bill together and for their ongoing work to support our constituents who have complex challenges and questions about their strata arrangements, which is much appreciated. I commend the bill to the House.

Mr GEOFF PROVEST (Tweed) (15:18): I contribute to debate on the Strata Managing Agents Legislation Amendment Bill 2024. The purpose of the bill is to introduce a series of amendments aimed at improving the governance, transparency and accountability of strata managing agents in New South Wales. The bill incorporates additional updates based on 139 recommendations from the 2021Report on the statutory review of the Strata Schemes Development Act 2015 and Strata Schemes Management Act 2015, which was tabled at the time by the Coalition Government. As we know, today New South Wales has one of the highest concentrations of strata title properties in Australia. Over 80,000 strata schemes are registered in the State, accommodating hundreds of thousands of residents. That prevalence underscores the critical role that strata schemes play in the housing market.

Strata schemes are not limited to residential apartments; they also include townhouses, commercial buildings, mixed‑use developments and retirement villages. That versatility has further driven the adoption of strata titles across various sectors. The great electorate of Tweed has the greatest concentration in the State of people living in residential parks and caravan parks. That trend continues to grow and very much so. I agree with the member for Gosford's comment that a lot of the inquiries to our electoral offices are based on issues arising out of strata management—the different fees and so on. I represent a fairly different area, and I have raised many times in this House the inability of the NSW Civil and Administrative Tribunal to deal with rental properties and the like because, under the current legislation, NCAT can only do so if the owner lives within the State of New South Wales. If they live just across the border, which could be just across the street in my electorate, NCAT is unable to deal with the matter.

The proposed reforms provide for commission and disclosure requirements. The bill inserts a definition of "commission" to include an insurance broker fee and increases maximum penalties for breaches by strata managing agents. It also requires that any approval for commissions or training services received by strata managing agents be supported by detailed documentation and approved by resolution at a general meeting. It includes mandatory disclosure of connections between strata managing agents and suppliers of goods or services for the strata scheme. In relation to transparency in financial transactions, the bill enhances transparency requirements by mandating that strata managing agents disclose detailed information about insurance quotations, including breakdowns of charges and connections with providers.

It also requires a strata managing agent to notify the owners' corporation before entering into contracts for goods or services if commissions or training services are involved, particularly if the supplier is connected with the agent. That is very important. I had the privilege a number of years ago in the previous Government to be on a committee that conducted a thorough investigation into embedded electricity networks. I know they are being addressed in certain areas, but it is still a major issue, particularly in caravan parks and retirement villages. I implore the Minister to keep focused on embedded electricity networks. They also apply to hot water, cold water and a whole raft of things. I think there are some unscrupulous developers out there that have used them to their own advantage; in fact, I am sure they have. I am sure the Minister will take that into consideration.

In relation to procedural requirements for strata schemes, the bill amends procedures for general meetings, requiring that approvals relating to commissions or training services be explicitly recorded and justified, and enhances the role of the Secretary of the Department of Customer Service in appointing accounts examiners to safeguard the compensation fund and enforce compliance with relevant Acts. The bill also introduces provisions prohibiting agents from charging commissions for insurance purchases that were not facilitated by them. It requires detailed disclosure of insurance‑related financial transactions, including the breakdown of premiums, commissions and other related charges.

In relation to regulation and compliance, the bill ensures that the amendments are consistent across related Acts, including the Community Land Management Act 2021 and the Property and Stock Agents Act 2002, to maintain uniformity in regulations governing strata and community title management. It also extends reporting obligations. Strata managing agents must report any new connections with suppliers or original owners and disclose any pecuniary interests acquired in the strata scheme. The bill does go a long way. I thank the shadow Minister for Small Business, and shadow Minister for Fair Trading, Work Health and Safety and Building for his in‑depth briefing to our shadow Cabinet. I support the bill.

Mr ANOULACK CHANTHIVONG (Macquarie Fields—Minister for Better Regulation and Fair Trading, Minister for Industry and Trade, Minister for Innovation, Science and Technology, Minister for Building, and Minister for Corrections) (15:24): In reply: I thank members for their contributions to debate on the Strata Managing Agents Legislation Amendment Bill 2024, particularly my colleagues the member for Liverpool, the shadow Minister and member for Willoughby, the member for Parramatta, the member for Sydney, the member for Heathcote, the member for Granville, the member for Mount Druitt, the member for Cabramatta, the member for Newtown, the member for Charlestown, the member for Fairfield, the member for East Hills, the member for Gosford and the member for Tweed.

The bill marks an important step in the Government's commitment to modernise our strata laws in New South Wales. The Government's comprehensive plan to build more affordable and high-quality homes across the State will see a further increase in the number of strata residents. Hence, it is imperative that the people of New South Wales have the confidence to invest and live in strata schemes. For many strata schemes, strata managing agents play pivotal roles in assisting owners' corporations to manage those schemes. Agents should be acting in the best interests of their clients, owners' corporations, when performing their duties. The bill directly addresses recent concerns about agents exploiting their position of trust and authority to obtain financial benefits. In particular, it will close the gaps in the law that currently mean that agents do not have to inform owners' corporations about suppliers that are related entities.

The bill will require an agent to disclose more information to the owners' corporation about potential conflicts of interest more often; ban an agent from receiving a commission where the owners' corporation arranges insurance quotes and the purchase of insurance without the agent; increase the maximum penalties and penalty infringement notice amounts for breaches of agents' disclosure obligations; and strengthen NSW Fair Trading's compliance and enforcement powers, including by introducing a broader enforceable undertaking power. I acknowledge there is more work to be done to address the challenges in the strata industry, including the impact of commissions. However, the bill is a critical next step in the Government's plan. Further work is already currently underway to determine the best way to address concerns about agents continuing to receive commissions, while keeping costs as low as possible for strata residents. The reforms in the bill promote transparency within the strata industry and will empower the people of New South Wales to continue to choose strata living as a great housing option.

I will now respond briefly to points made by members. Once again, I thank the shadow Minister, the member for Willoughby, for the Opposition's support of this important bill. I assure him and the Opposition that the Government is committed to listening to stakeholders to ensure that its reforms uphold consumer needs and support a better strata industry that can continue to deliver the essential services that owners' corporations need to effectively manage their schemes. We will certainly continue to work closely with key stakeholders, including the Strata Community Association and Owners Corporation Network. The shadow Minister mentioned the 2021 statutory review of the strata legislation and suggested that the bill stemmed from the work of the former Government on that review. I make it clear that the bill is in fact separate to the Government's work to implement the recommendations of the 2021 statutory review, which we will continue to do.

The bill is a result of the Government's quick and decisive work to address problematic practices by which some managing agents take advantage of owners. We have heard about strata managing agents charging excessive fees and commissions when buying strata insurance and using the services of subsidiary companies to obtain financial benefits without their clients' knowledge. The bill is the first step in the Government's response to those problematic strata management business practices and further work is underway. I acknowledge the calls of the member for Sydney and the member for Newtown for the Government to ban commissions. The Government is committed to protecting consumers. The poor behaviour of agents that has been reported in the media is unacceptable.

Let me be clear: Banning strata insurance commissions is absolutely on the table. The suggestion from the member for Newtown that the Government has pandered to vested interests by not immediately banning commissions is completely baseless. I have tasked NSW Fair Trading with consulting strata owners and industry on how that reform would work in practice. It is utterly appropriate for Fair Trading to undertake the consultation process on such a significant policy change. I am disappointed but unsurprised that The Greens are not supporting the bill. I am not sure why The Greens are against closing loopholes in the existing legislation to empower owners' corporations. I would have thought The Greens would welcome increased transparency to arm owners with information so that they can better question the practices of a strata managing agent who is not acting in the best interests of owners. In fact, the decision of The Greens to oppose the bill is quite shortsighted.

The bill will strengthen disclosure obligations on strata managing agents, particularly in relation to related parties. Under the current law, strata managing agents can still benefit from handing contracts to a related party, even if no commission is paid. The Government's bill will make it harder for agents to hide those relationships. Are The Greens really opposed to that? I have already made it clear that there is further work to be done regarding the payment of commissions. But we do not want to sit back and allow loopholes to continue when we can act quickly to close them. Overall, stakeholders supported the feedback the Government received during the targeted consultation process on the bill as a step in the right direction. I acknowledge the position of the Owners Corporation Network that the bill does not go far enough because it does not ban commissions outright. I have assured members that the Government is seriously considering that matter.

As I have said, the Government is committed to consulting with stakeholders to ensure the changes we make achieve the outcomes we want and will not have unintended detrimental impacts. As members know, last year the Government passed the Strata Legislation Amendment Act 2023 to implement 31 recommendations from the statutory review of strata laws. The Government expects to introduce the next tranche of reforms as soon as possible to implement most of the outstanding key statutory review recommendations. This tranche includes important reforms in relation to strata committee duties, unfair contract terms, the embedded networks that were mentioned by the member for Tweed, strata agents, building managers, and repairs and maintenance. Targeted consultation on the Government's next reform bill to implement the remaining statutory review recommendations is currently ongoing.

The Government is dedicated to taking meaningful action against behaviour that undermines confidence in strata living. By passing the bill, we are upholding fairness and transparency, which are essential for effective strata governance. I thank the key stakeholders who provided valuable input on the bill. Their input helped to ensure that the bill works effectively and achieves the intended goals. I thank NSW Fair Trading staff for their hard work to bring the bill to fruition so quickly. I especially thank Jasmin Chin, Katerina Pavlidis, Lachlan Malloch, Melanie Sun, Timothy Lohman, Melissa Pinto, David Byrne and Eric Bateman. Lastly, I thank my staff for their dedication to this important piece of work. I thank Alicia Sylvester and Brooke O'Rourke for their commitment and dedication to the bill. I commend the bill to the House.

TEMPORARY SPEAKER (Mrs Tanya Davies): The question is that this bill be now read a second time.

Motion agreed to.

Third Reading

Mr ANOULACK CHANTHIVONG: I move:

That this bill be now read a third time.

Motion agreed to.