This year, Four Corners has been investigating the strata industry, after revelations that one of its most high-profile firms has been charging millions of dollars in opaque, often hidden, insurance fees and taking an untold sum in kickbacks from contractors.

We asked you, our audience, just how widespread these practices were, and more than 2,000 of you responded, many with extraordinary details of hidden charges, phantom fees and suspect deals with contractors.

Questionable charges

The practice of overcharging — or charging questionable fees — goes right to the top of the industry and it includes instances in which companies profit even off the back of statutory levies.

Strata Hub was introduced in 2022 as a major NSW government reform. Its introduction was designed to tackle the paucity of hard data on the strata industry.

The reform requires every unit-holder in the state to pay an annual $3 fee to fund a “digital platform that centralises key information for people who live, own, build or work in strata schemes in NSW”.

But Four Corners has learned that the business run by senior industry figure Tony Irvine, has been charging additional fees to administer the scheme.

Tony Irvine is the NSW president of the industry’s peak body, the Strata Community Association (SCA).

He took over the top job after his predecessor, Stephen Brell, was forced to stand down following a 7.30 interview in which he admitted his company, Netstrata, had failed to disclose a raft of kickbacks.

In a Zoom briefing with strata managers from across NSW late last year, Mr Irvine appeared beside Mr Brell and joked about the additional profit he was making from Strata Hub.

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This prompted laughter among his SCA colleagues, including Mr Brell.

Mr Irvine went on: “And will continue to buy, well, buy someone else a new ute for the next little while.”

In a statement to Four Corners, Mr Irvine defended his comments: “With regard to any comments made in jest, they were just that.

“As an additional regulatory requirement outside of the management agreement inclusions, strata management businesses billed as appropriate for the time required,” he said.

In another case, in 2019, Michael Bluwol discovered the strata manager for his Dee Why building, on Sydney’s northern beaches, had reported an almost $1,000 charge to the owners’ accounts that he knew nothing about.

The building’s strata manager at the time was Mason & Brophy, a subsidiary of one of the largest strata companies in the world — the Prudential Investment Corporation of Australia (PICA), which is owned by companies from Ireland and Japan.

The building’s accounts recorded the $945 expense as a fee for a workplace health and safety report. But neither Mr Bluwol nor his fellow committee members had any recollection of the building approving payment for such a report, nor of one having been circulated.

When Mr Bluwol repeatedly enquired about the payment, Mason & Brophy sent him an email with the “WH&S Common Property Safety Report”. Across the top of its front page, however, the date of the document was printed in bold capitals: “MAY 2015”.

Looking through all the 2019 invoices, Mr Bluwol found there had not been a $945 payment to the company that wrote that safety report that year. He said this meant that the strata firm had taken the money for no proper purpose and to pay no supplier.

“It was a report that we, the owners corporation, had already obtained and paid for about five years earlier,” he said.

When Mr Bluwol asked PICA for answers, and later a refund, he was met with silence.

The company declined to provide direct answers to Four Corners’ questions.

Asked about the affair, John Minns, the New South Wales strata and property services commissioner, said the government had acted against PICA: “There was disciplinary action taken in the form of penalty infringement notices.”

Phantom fees

In Melbourne, Alison Parkes discovered the company responsible for her building — Strata Plan — had been charging the owners corporation for more overdue levy notices than it should.

“People were being charged in a ridiculous fashion,” she said.

“There were two apartments at one stage that owed 60 cents each and Strata Plan charges $101.48 each to try and follow up on that 60 cents.

“[It] makes no economic sense at all.”

The company refused to abide by formal instructions given by Ms Parkes and her committee to seek approval before the remittance of any funds — including to itself — and continued to access the owners corporation’s accounts.

Worse was her discovery the firm had been systematically charging for phantom debts.

“If there were 10 people who were actually in arrears, hadn’t paid their levies on time, they were billing us for 34 notices being sent out,” Ms Parkes said.

Ms Parkes calculated Strata Plan overcharged her building $3,802.65 for debt notices in nine months alone.

Despite repeated requests for comment, Strata Plan declined to answer any of Four Corners’ questions.

Kickbacks

One of the country’s largest strata firms, Bright & Duggan, which has almost 5,000 buildings under management, receives kickbacks from a variety of companies contracted with clients’ funds.

The company received a referral fee of 7.5 per cent from Solutions In Engineering, a compliance reporting company, and up to 15 per cent each from quantity surveyor Seymour Consultants and HUM Energy, a provider of embedded power and hot water networks to new developments.

These kickbacks are among no fewer than 32 commercial arrangements disclosed in some of the contracts Bright & Duggan’s companies execute with their clients — but not all. When they are disclosed, Bright & Duggan says its cut of some of these deals is substantial.

For example, it has disclosed that when insurance is placed through a company called Inglis Insurance Group, Bright & Duggan receives “up to 75 per cent … of the broker fee”.

Another strata firm, Independent Unit Management, or IUM, has a dizzying array of “commercial relationships with service providers”. In all, some 38 separate contractors kick a share of the owners’ fees back to the firm in the form of an “annual fee”.

These fees range from $15,000 paid back to the firm by Affordable Roofing, to $27,500 paid by a firm called Strata Advisory Services. Electrical, plumbing and cleaning companies, as well as glaziers, gardeners and pest controllers all cut cheques to IUM of as much as $55,000 a year.

IUM claims in its disclosure to clients that these rebates “do not cause any increase in costs” to owners and that owners can use alternative contractors at will.

In a sales pitch obtained by Four Corners prepared by solar energy company BSC Solar, strata firms are promised an “ongoing revenue stream” should they engage the company.

“BSC Solar will pay the strata management company 3 cents per kWh for each building under their management that partners with BSC Solar.”

BSC Solar was deregistered last year.

Cosy relationships

When new buildings are completed, the developer still often owns enough apartments to dominate the owners corporation. This gives the builder the power not only to appoint a strata manager, but also the ability to negotiate terms which are more favourable to it — rather than the owners soon to buy in.

Strata managers know the law requires them to act in the interests of apartment owners, and not the developer who appointed them. But, with future developments and management contracts in the pipeline, there can be a financial incentive to cater to the developer.

This tension — which is an open secret among those who work in the industry — often surfaces when defects emerge in new buildings. While new owners expect their strata manager to help them ensure the builder repairs the defects, some strata managers can be reluctant to do so.

Gavin Cooper’s owners corporation in Prahran in Victoria terminated its agreement with Melbourne firm Tideways because, in part, it feared the company was too close to developer Platinum Constructions.

During an ongoing fight over defects, the owners were forwarded an email that, in their eyes, showed the developer was still calling the shots. When Tideways sent the builder a letter seeking reimbursement of about $5,000 spent on urgent repairs, Platinum Constructions wrote back.

“[The] developer platinum, or our subbies, will not be paying for your subcontractors largesse … I made this clear to you when we gifted these buildings to your company.”

Mr Cooper said the email led him to believe Tideways were looking after the builder’s best interest.

Platinum Constructions declined to answer questions, but in an owners meeting in 2020, a company representative said the email had been misinterpreted.

A Tideways spokesman said it too was “shocked and disappointed by the builder’s [reluctance to repair the building’s defects], including the gratuitous comment about how we were awarded the contract”.

“We want to make it clear that we secure all our work based on merit, reputation, and our track record of high performance,” he said.

The concerns of the Prahran owners about the relationship were heightened by the revelation that Tideways had set aside several thousands of dollars of owners’ funds to pay for the removal of waste from a single commercial property on the ground floor of the building — which was owned by a company associated with the developer.

“They effectively wrote into the budget that the rest of the building, the residential owners, would be paying up to $6,000 a year worth of bin collection fees for that property,” Mr Cooper said.

“Tideways had overseen the developer writing terms that favoured themselves rather than being fair for the owners corporation.”

During the 2020 annual general meeting, a Tideways executive said: “I fall on my sword in relation to that point.”

Unfair contracts

When owners decide to sack their strata company, they sometimes find it’s not that easy.

It’s not uncommon for strata management contracts to contain termination clauses that require the calling of a full meeting of owners. Some go further, seeking to restrain the powers provided to owners corporations under the law.

Netstrata has contracts that expressly state any motion to terminate its services “will not be valid unless a meeting of the owners corporation is convened”, which must be “conducted by the agent” — meaning by Netstrata itself.

Strata Plan is one firm that routinely issues legal threats when its clients threaten to terminate its services.

After a long battle with the company over its billing practices, Alison Parkes and her fellow owners decided to sack Strata Plan.

“These guys just [were] not going to change their behaviour,” Ms Parkes said.

“So, we terminated. And then we all got a lovely legal letter telling us that we were going to be sued and demanding $52,000 in termination fees.”

The letter also warned the committee members may be personally liable, which Ms Parkes believed was an attempt at intimidation.

After refusing to pay the demand, Strata Plan accepted less than half that amount to walk away.

Jordan Reid is a Melbourne consultant who helps owners corporations escape from onerous strata management contracts. He said Strata Plan had repeatedly come across his desk.

“Strata Plan will basically use their contracts to fight back and to fight those termination letters,” he said.

“They’ll keep fighting until basically it’s drawn out [while] they keep taking those management fees. It’s that same pattern.”

Strata Plan is run by Melbourne businessman Simon Chamaa, who declined to answer any of the ABC’s questions.

In fact, Strata Plan is notorious.

The Victorian Civil and Administrative Tribunal found in 2015 the company had reached into a client’s bank account, with no proper basis, to pay itself more than $17,000 as damages for an alleged breach of contract.

The tribunal ordered it to repay the money and said it did not accept figures presented by Mr Chamaa. He had claimed the company was entitled to compensation for “17 hours or almost 2 days” to dispatch just 22 notices; the Tribunal found this evidence “was not credible”.

In one 2020 case that Mr Reid’s company worked on, an owners corporation in Collingwood was issued with an extraordinary legal demand for compensation. Strata Plan insisted the owners were liable to compensate the company for nine years of fees, and demanded $1,488,438.

Strata Plan’s lawyers warned that should the money not be paid within 14 days, “we will seek urgent instructions to commence proceedings” against the owners.

“It was just bully ball,” Mr Reid said.

The Victorian government has since attempted to thwart such incidents by legislating to limit the terms of strata contracts to a maximum of three years.

In 2022, after an investigation into multiple complaints against the company, the industry’s peak body cancelled Strata Plan’s membership. The Strata Community Association (SCA) called the company’s behaviour “unprofessional, unethical and obstructive”.

“The industry is not governed,” Mr Reid said.

“Strata Plan being kicked out of SCA, they’re still in business, they’re still managing companies. [It’s had] zero effect.”

Corporate buy ups

The strata industry has transformed over the past decade, as large corporations have steadily acquired their smaller competitors.

In the hunt for a greater slice of the billions of dollars pouring into strata management, these players are focused on what’s described as “vertical integration”.

In December 2020, the owners of Martha Cove, a marina development on Victoria’s Mornington Peninsula, saw how vertical integration might be driving up costs.

In a late-night car crash, a Mercedes Benz careered over a retaining wall and onto the marina boardwalk.

For Robert Vandermeer, chairman of one of Martha Cove’s owners corporations, it was only when he saw the company hired to repair the marina — Johns Lyng Group — that alarm bells started to ring. The contractor is a billion-dollar public company.

“[It] struck me as very strange given Johns Lyng Group are an international company,” he said.

“It just didn’t make sense that they would be undertaking what is a fairly small repair down here.”

Martha Cove’s strata manager, Cambridge Management Services, had separately asked Johns Lyng for a quote to replace a set of stairs at the crash site.

One of Johns Lyng’s offers was a quality timber replacement at $95,000.

When Mr Vandermeer found an alternative solution at one-third the cost, he was astonished when Johns Lyng immediately slashed its price by 20 per cent.

“It just defies logic,” Mr Vandermeer said.

Johns Lyng told the ABC its prices are reviewed for competitiveness and “customer feedback”.

Mr Vandermeer began to unravel the connections between the companies. His strata manager Cambridge Management Services was owned by Bright & Duggan, which, in turn, was majority-owned by Johns Lyng.

His strata company had engaged a brokerage firm — Collective Insurance Brokers (CIB) —controlled by a multi-billion-dollar public company called Steadfast Group.

Not only does Steadfast own the insurance company recommended by the broker, it also holds a stake in Johns Lyng — the very same company hired to repair the marina.

Mr Vandermeer had to scour the internet and the fine print of his strata documents to piece together these connections.

Some weren’t disclosed anywhere at all.

One was a secret interest held by Martha Cove’s strata manager in CIB, the insurance broker it had been using. This interest was in an undisclosed agreement to kick back to Bright & Duggan an unknown percentage of the broker’s earnings.

Another failure of disclosure, this time by CIB, emerged when the Martha Cove owners needed to finance their insurance premiums.

CIB recommended they obtain finance from a premium funder called IQumulate — but did not disclose that IQumulate was yet another Steadfast company.

When pressed on why this relationship had not been declared, Steadfast boss Rob Kelly said: “There’s no necessity I suppose to do that.”

What really disturbed Mr Vandermeer about the loan proposal, however, was that within a few minutes of online searching, he was able to find a cheaper deal from a non-Steadfast lender.

In an interview with Four Corners, Mr Kelly refused to accept that IQumulate’s offer was inferior.

“IQumulate is the second-largest premium funder in Australia,” he said.

“Do you think it got to be the second-largest premium funder in Australia by being twice the price of everybody else? The answer to that question is they could not possibly be like that. So what you’re putting to me is not correct.”

Four Corners has checked with multiple authorities, all of whom agreed the IQumulate offer was more expensive.

Associate Professor Christopher Angstmann, deputy head of mathematics at the University of NSW, said IQumulate’s “annual cost rate” was more than twice that of the non-Steadfast offer.

“If all of this was declared to us, then we could decide for ourselves whether that was a fair thing or not. But the fact that it’s kept from us, it doesn’t smell right.”

Bright & Duggan’s managing director Chris Duggan said: “The inference that an absence of proper disclosure has led to improper business conduct, including collusion is … [not] supported by the records or practices in relation to Martha Cove nor any other scheme under management by the Group.”

He said Cambridge Management Services had provided extensive disclosure of its “corporate relationships”.

But he also admitted that the management contract provided to owners at Martha Cove was “incomplete” in failing to record some of the conflicts of interest, and said this was “an isolated administrative error”.

Secret insurance deals

Steadfast has a number of agreements with strata managers to channel owners’ funds back to the strata firms. The disclosure of these deals to owners is patchy and often non-existent.

CIB, which has kicked back undisclosed fees to more than a dozen strata companies, is one example.

Bright & Duggan’s participation in the CIB scheme came to an end earlier this year. Until then, Mr Duggan had been a director of CIB.

He said CIB was a “co-operative venture” of 14 strata companies to “achieve economies of scale”.

“Consumers benefited from a lower cost of insurance distribution than the industry standard of plus 20 per cent strata manager commission and equivalent broker fee seen in many alternative brokerage models.”

He said Bright & Duggan’s total income from CIB averaged about 15 per cent of the base premium paid by owners, “with efficiency commission payments contributing less than 2 per cent of base premium”.

Mr Duggan said that his company “rebated” its insurance commissions to, for example, Vandermeer’s owners corporation on the Mornington Peninsula.

But experts say this is where the CIB deal — and others like it — can mislead consumers.

While the owners at Martha Cove might have been reassured by the “rebate” of insurance commissions, they’ve been completely unaware that their strata manager was still receiving a share of what they spend on insurance — through what Steadfast boss Robert Kelly described as its “de facto” shareholding in their insurance broker.

Mr Duggan defended the lack of disclosure of this deal to owners.

“This income was not guaranteed or possible to anticipate in advance,” he said.

“We believed the general relationship disclosure, providing for up to 20 per cent commission, was compliant and sufficient by the standards at that time.”

Watch Four Corners’ full investigation The Strata Trap from 8:30pm tonight on ABC TV and ABC iview.

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