This article discusses new laws addressing building managers conflict of interest to ensure transparency and prevent secret commissions in NSW strata schemes.
Question: What protections exist to prevent conflicts of interest or secret commissions when a building manager engages contractors on behalf of owners?
In my strata plan, the strata committee and strata manager have delegated the authority to engage contractors, such as electricians and plumbers, to the building manager. I’m concerned this arrangement could create opportunities for corruption or secret commissions. What safeguards are in place to prevent this between the building manager and contractors, and does the legislation address these potential conflicts of interest?
Answer: The new section 70A, addressing this, began on 27 October 2025.
Previously, under NSW legislation, there was no express statutory prohibition on a building manager receiving commissions or benefits from contractors they engaged. Nor were building managers subject to clear legal obligations to disclose referral fees or conflicts of interest, unless such obligations were included in the building management agreement. However, the owners corporation retains the power to define and limit the scope of a building manager’s authority under section 67 of the Strata Schemes Management Act 2015 (NSW) (the “Act”), including by imposing conditions around procurement, approvals, or financial interests.
The Strata Schemes Legislation Amendment Act 2025 (NSW) introduced a new section 70A into the Act, which states that the building manager must act in the best interest of the owners corporation. A violation of section 70A may result in penalties of up to 100 units for an individual or 200 units for an entity. Included in the duty to act in the best interest is the obligation to disclose potential conflicts of interests, which are set out in the new Part 2A of the Strata Schemes Management Regulation 2025 (the “Regulation”). Pursuant to section 17F of the Regulation, when proposing a contract to the owners corporation, the building manager must disclose any benefit they may receive from entering into a contract, or any pre-existing relationship with the contractor. This obligation continues to exist after the contract is entered into, as the building manager must also disclose any relationship or benefits with a supplier by written notice as soon as practicable under section 17G of the Regulation.
These changes commenced on 27 October 2025.
Julia Moroz
Bugden Allen
E: julia@bagl.com.au
P: 03 8582 8100
This post appears in the December 2025 edition of The NSW Strata Magazine.
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Read next:
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