More overcharge shock for Netstrata clients

By Sue Williams

A new investigation by the ABC has alleged that controversial strata management company Netstrata has overseen its apartment owner clients being charged  secret insurance brokerage fees up to six times the industry standard.

In the latest expose of the high-profile strata management company, ABC investigative reporter Amy Greenbank said it was the first time Netstrata customers could see the real cost of brokerage fees charged, it has been claimed, to by-pass laws that require strata managers to declare insurance premiums.

Generally, a brokerage fee would be 20 to 25 per cent of the premium, but one block in Sydney’s Sutherland had been charged a fee that was a shocking 148 per cent of the base premium, and another in Camperdown paid 115 per cent.

Netstrata was earlier this year exposed for using a network of its own companies to provide insurance and other services, charging hidden and often exorbitant fees for doing so. 

But this new allegation surfaced after Netstrata belatedly uploaded a series of invoices onto client’s online portals. Critics say this looks like a belated attempt to claim it has been transparent about its processes but the size of the fees, have caused outrage.

The ABC reported that Tyrone Shandiman, chair of the Australian Consumer Insurance Lobby (ACIL), said he had never previously seen these levels of surcharges.

“It’s very unusual,” he told the ABC. “We consider 40 per cent to be excessive and unreasonable.”

One of the owners in Sutherland, Kerrie Hutchinson, told the ABC that, on sighting the invoices her building had paid, “My jaw was hanging off. I couldn’t believe it,”

Netstrata is already in hot water with industry regulator, NSW Fair Trading, who launched an investigation into its practices in May, in response to earlier ABC TV 7.30 Report and 4 Corners stories by Linton Besser about the company giving client business to its wholly-owned insurance arm and taking kickbacks from contractors and suppliers.

Its CEO, Stephen Brell, then stepped down from his role as President of the strata managers’ professional body, SCA-NSW and was encouraged to resign as a member of its board.

Netstrata now faces imminent release of an independent review into its business structures. As we reported recently, the strata management giant has agreed to pay costs of the review of up to $300,000.

The fact that the results of the inquiry have been delayed for several months, and meanwhile the state government has been rushing through new legislation to force greater transparency and to curb conflicts of interest, can hardly be taken as positive signs.

Meanwhile the ABC report has dragged whole question of “full delegation”, where strata managers take over the running of the strata schemes from the owners – claiming this is standard practice – into the spotlight.

And the strata management industry is tearing itself apart with the good, honest operators distressed at being held in the same negative regard as their less diligent colleagues, while having to defend their industry against both valid and less justified criticism.

As they say in show-business, this one will run and run.