Financial Management
In this article
- What commissions and kickbacks in OC management actually look like
- Why insurance commissions are the biggest hidden cost
- Disclosure requirements under the OC Act 2006
- How to demand transparency from your OC manager
- Best practice for managing contractor relationships
Hidden costs are more common than you think
Insurance commissions, contractor referral fees, and bulk buying rebates can significantly inflate the amount lot owners pay without their knowledge. Transparency requires active effort from committees.
One of the most persistent concerns among lot owners and committees in Victoria is the lack of transparency around commissions, rebates, and other financial benefits received by owners corporation managers from third parties.
What Are OC Management Commissions?
Commissions are payments or financial benefits received by the OC management company from third-party service providers. The most common forms:
- Insurance commissions: Payments from insurance brokers or insurers for placing the OC’s insurance through a particular provider (typically up to 20% of the premium)
- Contractor referral fees: Payments from contractors for being recommended or appointed
- Bulk buying rebates: Discounts received for purchasing across multiple managed buildings
- Finance and investment commissions: Payments for placing OC funds with particular banks or investment products
The Insurance Commission Issue
If your building’s insurance premium is $50,000 per year and the management company receives a 20% commission, that is $10,000 per year flowing from the owners corporation — on top of the management fees already being paid. Over 10 years: $100,000 or more.
These commissions are built into the insurance premium, meaning lot owners are paying for them through their levies without necessarily knowing they exist.
⚖️ Disclosure obligations — OC Act 2006
OC managers are required to disclose any financial benefits received in connection with their management, including commissions. The SCA (Vic) standard contract of appointment also includes disclosure obligations.
How to Demand Transparency
For committees
- Request a detailed annual disclosure of all commissions, rebates, and financial benefits — in dollar amounts, not just percentages
- Obtain independent insurance quotes directly from brokers which disclose any commission payments
- Include a requirement for annual commission disclosure in the management contract
- Consider appointing an independent insurance broker not connected to the management company
For lot owners
- Raise the issue of commissions at the AGM and request disclosure from the committee and manager
- Ask the committee to include commission disclosure as a standing agenda item at each AGM
- If disclosure is not forthcoming, consider lodging a formal complaint or applying to VCAT for access to the relevant records
Best practice for competitive quoting
- Require at least three independent quotes for any significant works
- Ensure at least one quote is from a contractor not recommended by the OC manager
- Review quotes independently before the manager makes a recommendation
- Ask the manager to disclose any financial relationship with recommended contractors
- Consider engaging an independent project manager for major works
Frequently Asked Questions
⚖️ Are OC managers legally required to disclose commissions in Victoria?
Yes. OC managers have disclosure obligations under the OC Act 2006 and industry codes of conduct. However, the extent and frequency of disclosure can vary — lot owners should actively request detailed annual disclosure.
💰 Can the OC demand that commissions be rebated?
The OC can negotiate the treatment of commissions as part of the management contract. Some OCs negotiate for commissions to be rebated to the OC or offset against management fees.
🔍 How can I find out how much commission our OC manager receives?
Request a detailed written disclosure from your OC manager. If the manager is reluctant, the committee can require it as a condition of the management contract, or lot owners can raise it at the AGM.
📋 Key takeaways
- Insurance commissions can range up to 20%+ of the premium — a significant hidden cost for lot owners.
- OC managers have legal disclosure obligations under the OC Act 2006 and industry codes of conduct.
- Request a detailed annual disclosure of all commissions, rebates, and financial benefits in dollar amounts.
- Require at least three competitive quotes for significant works — including one not recommended by the manager.
- Negotiate commission rebates or offsets as part of the management contract at the time of appointment.