VIDEO: The Strata Trap

'THE STRATA TRAP'

9 SEPTEMBER 2024

Four Corners

LINTON BESSER, REPORTER: We're told the solution to the housing crisis is high density. Millions more apartments are coming.

REBECCA BOEHM, PERTH APARTMENT OWNER: It's really hard as a teacher and a single mom to be able to afford a property. So kind of having an apartment or a unit was a way for us to get into the housing market.

LINTON BESSER, REPORTER: The companies hired to manage these buildings are cashing in to the tune of seven billion dollars a year. But this strata industry is trapping apartment owners in a nightmare.

JOANNE HARRIS, ADELAIDE APARTMENT OWNER: it's the hidden costs. It's the, the random mismanagement costs that you know nothing about.

LINTON BESSER, REPORTER: Across the country, governments have failed to keep up…

JOHN MINNS, NSW STRATA & PROPERTY SERVICES COMMISSIONER: There is no question we need to do a better job of regulating strata.

LINTON BESSER, REPORTER: …and they're not protecting owners.

DAVID HAMPTON, FORMER CEO, CHU INSURANCE: Government's gotta invest in this. It's all going to hell in the hand basket.

LINTON BESSER, REPORTER: Earlier this year, we asked you to tell us your stories about living in strata. Thousands of you responded…

SUSAN SENNET, SYDNEY APARTMENT OWNER: This is the spreadsheet that we produced which documented every invoice that had been paid without our authorisation.

LINTON BESSER, REPORTER: …with horror stories of graft and greed.

APARTMENT OWNER #1: MAN: You're a lowlife, you're a scumbag. That's what you are.

APARTMENT OWNER #2: Hey guys, we just got shafted.

GARTH MIDGLEY, MELBOURNE APARTMENT OWNER: It's just like a Pandora's box opened up and it was like one thing after the other.

MICHAEL DOPKING: Payments made for services not provided.

LINTON BESSER, REPORTER: In this Four Corners – made with your help – we reveal apartment living is putting us at the mercy of a rapacious and unethical industry. The rot runs deep from hidden fees to secret insurance kickbacks to deals with developers. Our findings will shock you.

MARK SWAIN, SYDNEY APARTMENT OWNER: It's almost as if the whole business model has been designed to frankly screw Australian apartment owners.

DAVID HAMPTON, Former CEO, CHU Insurance: I've always said, this industry needs a Four Corners moment.

ALISON PARKES, MELBOURNE APARTMENT OWNER: I wish I'd known that working with the strata manager was going to be so difficult and complex and time consuming.

LINTON BESSER, REPORTER: We start this story with the most common way that strata firms exploit apartment owners. Many of you told us strata managers charge you outrageous fees which are completely unnecessary. Alison Parkes' strata manager really should have thought twice before trying to pull the wool over her eyes.

ALISON PARKES, MELBOURNE APARTMENT OWNER: So my background is in accounting. My whole career has been built around that. So when I came to live in this building, I wasn't really interested in doing my work in my home. But the longer I lived here, the more I realised that it looked like there were problems with the management of the finances. So that was why I got involved in and…

LINTON BESSER, REPORTER: …joined the committee.

ALISON PARKES, MELBOURNE APARTMENT OWNER: Yes

LINTON BESSER, REPORTER: When you buy an apartment, you become a member of the building's owners' corporation. It elects a committee to run the building's affairs. Alison Parkes was the chair of her committee and began scrutinising the building's strata manager, a notorious company called Strata Plan. She soon found evidence of suspect practices. One was the way it billed owners for chasing overdue levies.

ALISON PARKES, MELBOURNE APARTMENT OWNER: People were being charged in a ridiculous fashion. There was two apartments at one stage that owed 60 cents each and Strata Plan charges $101.48 each to to try and follow up on that 60 cents, which makes no economic sense at all.

LINTON BESSER, REPORTER: Alison Parkes and her fellow owners tried to rein the company in.

ALISON PARKES, MELBOURNE APARTMENT OWNER: We withdrew the delegated authority for Strata Plan to sign off on payments. I wrote to them several times and said, this invoice is wrong. You have charged us too much. You need to refund the money. And I, they just ignored me. I've never seen it in over 40 years in accounting.

LINTON BESSER, REPORTER: Worse, Strata Plan was charging owners to chase phantom, non-existent debts.

ALISON PARKES, MELBOURNE APARTMENT OWNER: 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 and what I discovered was a systemic problem. I'm repeatedly writing to them saying we're being overcharged. And they're still just helping themselves hand in pocket, Strata Plan, writing an invoice, paying themselves, overcharging us, and we can't stop it. It's like a nightmare.

LINTON BESSER, REPORTER: When the owners decided to terminate Strata Plan's contract the company threatened litigation, demanding more than $50,000 compensation.

ALISON PARKES, MELBOURNE APARTMENT OWNER: There was a section here, personal liability of committee members that says each committee member may be held personally liable for damages and costs. Certainly committee members did feel intimidated and you would.

LINTON BESSER, REPORTER: The owners pushed back and Strata Plan accepted a break fee of less than half that amount.

JORDAN REID, STRATA MANAGEMENT CONSULTANTS: Strata plan will try, basically use their contracts, um, to, to fight back and to fight those termination letters.

LINTON BESSER, REPORTER: Jordan Reid's company has helped a number of owners escape from Strata Plan's clutches, including in one case where, upon termination, the company had demanded nine years of fees.

JORDAN REID, STRATA MANAGEMENT CONSULTANTS: Strata Plan came back and basically said. That's gonna be at a sum of 1.488 million. And we need that within 14 days, otherwise we'll seek legal action.

LINTON BESSER, REPORTER: And what's your view of that?

JORDAN REID, STRATA MANAGEMENT CONSULTANTS: It's just bully, bully ball.

LINTON BESSER, REPORTER: The Victorian administrative tribunal has repeatedly made findings against Strata Plan for taking owners funds without authorisation. Two years ago it was thrown out of the industry peak body, the Strata Community Association, or SCA, for unprofessional and unethical conduct.

JORDAN REID, STRATA MANAGEMENT CONSULTANTS: Strata Plan being kicked out of SCA, they're still in business, they're still managing companies that has zero effect. They're still going about those same mispractices that we've seen over and over again.

LINTON BESSER, REPORTER: The man in charge of Strata Plan is Simon Chamaa. He loves Italian sports cars.

LINTON BESSER, REPORTER: Oh g'day, Mr Sharma. It's Linton Besser calling from Four Corners. I'm, I'm in the lobby of your building. He didn't want to answer Four Corners' questions.

LINTON BESSER, REPORTER: What you're saying to me is really important. You should come and say it. You should come and say it in an interview. He's hung up. But Simon Sharma said in fact, the industry peak body, the Strata Community Association, is the one with real questions to answer. And he declined to do an interview.

LINTON BESSER, REPORTER: With house prices now out of reach for so many, our capital cities have nowhere to go but up. Problem is, you've told us you can't trust the people hired to look after your most important asset.

JOANNE HARRIS, ADELAIDE APARTMENT OWNER: Being part of a strata makes you feel like you're not in control of your finances and that's something that I don't like.

DENIS PAULIN, SYDNEY APARTMENT OWNER: I wish I had known of some of their performances in the past because we found them to be deceptive.

REBECCA BOEHM, PERTH APARTMENT OWNER: We've never had a strata meeting until January this year. And as far as I know, the units have been here more than five years.

BILLIE HOGBEN, ADELAIDE APARTMENT OWNER: The most frustrating thing was being ignored when I've, when I requested for information around their procurement of contractors.

GARTH MIDGLEY, MELBOURNE APARTMENT OWNER: It's turned into a massive headache.

JOANNE HARRIS, ADELAIDE APARTMENT OWNER: I suppose it's that you feel helpless. There's nothing you can do other than sell it.

MICHAEL LEE, STRATA MANAGER & OWNERS' CORPORATION CHAIR: I have the authority and I have the power to run the meeting. You don't like it, you don't like it, you either you leave my meeting. Those member are the new committee…

LINTON BESSER, REPORTER: This is Michael Lee, a strata manager.

APARTMENT OWNER: What was the vote? What was the vote?

LINTON BESSER, REPORTER: Here he's chairing a 2023 meeting of owners of his own Sydney apartment building. They're in disbelief at what's going on.

MICHAEL LEE, STRATA MANAGER & OWNERS' CORPORATION CHAIR: So the meeting is now officially closed.

APARTMENT OWNER: What was the vote?

LINTON BESSER, REPORTER: For more than six years, Michael Lee was the building's chairman at times, also its secretary and treasurer. David Pitt-Owen fought for years to get him off the committee.

DAVID PITT-OWEN, SYDNEY APARTMENT OWNER: My motivation was to see the building in good shape. There were obvious problems and we, well, we rarely had a strata meeting.

LINTON BESSER, REPORTER: For three consecutive years, there was no annual general meeting of owners and the building's finances were in serious trouble. Worse still was the state of the property itself.

DAVID PITT-OWEN, SYDNEY APARTMENT OWNER: I've seen walls collapse. I've seen water running down the sides of walls in bedrooms. I've seen water bubbling up, through pipes onto the balconies and flooding bedrooms. Some of these people are living in shocking conditions, just shocking conditions.

LINTON BESSER, REPORTER: In 2021, Michael Lee surprised owners with a proposal to release the builder from a lawsuit over the building's defects.

DAVID PITT-OWEN, SYDNEY APARTMENT OWNER: a lot of the owners in the top two floors had rotting staircases, rotting walls, rotting carpet, uh, water was coming in through ceilings, uh, through light fittings. How could you say that the defects that all been fixed, how could you possibly release the builder?

LINTON BESSER, REPORTER: David Pitt Owen spent the next two years leading a rebellion of owners against Michael Lee. By the time he arrived at the 2023 AGM, he believed he had enough votes to dislodge Michael Lee from the committee, but it wasn't to be.

DAVID PITT-OWEN, SYDNEY APARTMENT OWNER: I walked into the vestibule to be greeted by, would've been at least seven security men. And I, I turned to one and I said, why are you here? And he said, Michael Lee's employed us. We were sort of herded like cattle by these, uh, security guards.

MICHAEL LEE, STRATA MANAGER & OWNERS' CORPORATION CHAIR: I run the meeting. I'm the chairperson. Please be respectful. Michael Lee's bouncers paid for out of the owners' funds blocked the doors. I have the authority and I have the power to run the meeting. You don't like it, you don't like it, you either you leave my meeting or go level 14 [NSW Civil and Administrative Tribunal] afterwards.

LINTON BESSER, REPORTER: They barred some owners from entering the room.

APARTMENT OWNERS: Let them in, let them in.

DAVID PITT-OWEN, SYDNEY APARTMENT OWNER: You felt as though you were, were walking into a police state. It was, it was just a horrible feeling.

MICHAEL LEE, STRATA MANAGER & OWNERS' CORPORATION CHAIR: You will be removed. All right. And that, that is a guarantee. OK.

LINTON BESSER, REPORTER: Lee railroaded the meeting.

MICHAEL LEE, STRATA MANAGER & OWNERS' CORPORATION CHAIR: Your proxy are not valid. If you disagree with me go upstairs [Tribunal]. I don't care. Go to the Supreme Court. Go to the Federal Court.

LINTON BESSER, REPORTER: At the end of the meeting, Michael Lee announced voting for the new committee would be held by secret ballot, and he would be counting the votes.

MICHAEL LEE, STRATA MANAGER & OWNERS' CORPORATION CHAIR: Anybody not happy with the result? You have all the right to go upstairs level 14 [Tribunal] or you can go to the you can doesn't really matter.

LINTON BESSER, REPORTER: The results he claimed…

MICHAEL LEE, STRATA MANAGER & OWNERS' CORPORATION CHAIR: Those member are the new committee.

LINTON BESSER, REPORTER: …put him back in power.

DAVID PITT-OWEN, SYDNEY APARTMENT OWNER: we were never shown the votes. He just came back up onto the stage, and said, these people have been voted in.

MICHAEL LEE, STRATA MANAGER & OWNERS' CORPORATION CHAIR: So the meeting is now officially closed.

DAVID PITT-OWEN, SYDNEY APARTMENT OWNER: It was at that stage that all the security guards surrounded him.

APARTMENT OWNER: You're a lowlife. You're a that's what you are, man. Hey guys, we just got shafted.

LINTON BESSER, REPORTER: Weeks later at the NSW Civil and Administrative Tribunal, Michael Lee consented to the appointment of a compulsory strata manager the $50,000-a-year contract was given to his wife's company.

DAVID PITT-OWEN, SYDNEY APARTMENT OWNER: it was disgraceful.

LINTON BESSER, REPORTER: When a group of owners challenged the appointment, the tribunal in this building ruled Michael Lee's behaviour was so dreadful the AGM should be struck from the record and run again.

NCAT MEMBER: 'I find that the conduct of the meeting was … egregious'…

LINTON BESSER, REPORTER: The Tribunal condemned his use of bodyguards to block owners and reject their proxies.

NCAT MEMBER: 'I hope Mr. Lee is still listening. That is not permissible under the act.'

LINTON BESSER, REPORTER: It also found that Mr Lee consenting to the appointment of his wife's company was..

NCAT MEMBER: … 'so improper' …

LINTON BESSER, REPORTER: … it had …

NCAT MEMBER: ..'absolutely no … justification …

LINTON BESSER, REPORTER: Mr Lee declined to be interviewed and sent us legal threats. In an email, he said he acted properly at all times. We finally caught up with him at this building in Sydney's north-west.

MICHAEL LEE, STRATA MANAGER & OWNERS' CORPORATION CHAIR: Are you guys coming for a meeting?

LINTON BESSER, REPORTER: Where he's about to run another strata meeting…

LINTON BESSER, REPORTER: Mr Lee, ABC Four Corners, we're just wondering why it was okay for your wife's company to get that contract …

MICHAEL LEE, STRATA MANAGER & OWNERS' CORPORATION CHAIR: No, no

LINTON BESSER, REPORTER: We've got some questions for you we'd really like you to answer.

MICHAEL LEE, STRATA MANAGER & OWNERS' CORPORATION CHAIR: Don't shoot, don't shoot, don't shoot. Don't shoot. I told you.

LINTON BESSER, REPORTER: Excuse me, don't touch the camera.

MICHAEL LEE, STRATA MANAGER & OWNERS' CORPORATION CHAIR: Don't shoot, I told.

LINTON BESSER, REPORTER: We're just wondering why it is that your wife's company got that contract? Why that was okay for you to consent to that?

MICHAEL LEE, STRATA MANAGER & OWNERS' CORPORATION CHAIR: I don't want to

talk to you, okay. Please leave.

LINTON BESSER, REPORTER: The NSW Government has confirmed it has placed Michael Lee under investigation.

LINTON BESSER, REPORTER: When a new building is completed often the developer still owns enough units to control the Owners Corporation and has the power to award a lucrative contract to a strata firm. The problem comes later when the units are sold and building defects emerge. The new owners expect the developer to fix them and the strata manager to act on their behalf. But here's the rub… The strata manager also wants to stay sweet with the developer, who has more buildings and more contracts in the pipeline. And this is how some strata firms become trapped in a fundamental conflict of interest.

GAVIN COOPER, MELBOURNE APARTMENT OWNER: It's a fantastic location where we're close to a train station. Public transport is excellent.

LINTON BESSER, REPORTER: And the city's right there.

GAVIN COOPER, MELBOURNE APARTMENT OWNER: The city is right there.

LINTON BESSER, REPORTER: When Gavin Cooper moved into his new apartment in Melbourne's trendy Prahran he had no idea of the strife to come with his strata manager, a company called Tideways.

GAVIN COOPER, MELBOURNE APARTMENT OWNER: It would've been within months of the building first settling, but we really started to question the relationship between Tideways and the builder and, uh, and whether they were acting in our best interests.

LINTON BESSER, REPORTER: From the outset, the building had issues.

GAVIN COOPER, MELBOURNE APARTMENT OWNER: There were probably about $5,000 worth of invoices that accumulated over the first few months of things that needed to be fixed front doors breaking, handles falling off things that needed to be fixed straight away so that residents could continue living here.

LINTON BESSER, REPORTER: So this is the email..

LINTON BESSER, REPORTER: When Tideways asked the builder to reimburse these costs and fix other defects, the building company said all of the repairs should have been approved by it first.

GAVIN COOPER, MELBOURNE APARTMENT OWNER: …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.

LINTON BESSER, REPORTER: What did that mean to you?

GAVIN COOPER, MELBOURNE APARTMENT OWNER: It led us to believe that Tideways were looking after the builder's best interest because they had given them the contract to manage this building.

APARTMENT OWNER: That's absolutely nonsense. Oh, my goodness.

LINTON BESSER, REPORTER: The issue came to a head at a fiery meeting of the owners in late 2020 …

APARTMENT OWNER: Is this what this is gonna be about? Come on, people.

LINTON BESSER, REPORTER: … which the builder attended …

BUILDER: You're a disgusting lot. I've never, I've done 100 buildings. I've never come across this in my life.

APARTMENT OWNER: I'm sorry. Did you just call us a disgusting lot?

LINTON BESSER, REPORTER: The builder insisted there was no conflict of interest in his

dealings with Tideways…

BUILDER: We gift it as I said, we gift it on one proviso, they look after the building..

LINTON BESSER, REPORTER: But the owners weren't convinced. They had discovered the builder had benefited from a deal that gave away parking in the building for 99 years for just $1 and that Tideways had chaired the meeting where the deal was formalised.

GAVIN COOPER, MELBOURNE APARTMENT OWNER: That was completely inappropriate. It was thousands of dollars per car space.

LINTON BESSER, REPORTER: On a property on the outskirts of Melbourne former Tideways employee Stewart Martin reveals that first meeting and the parking deal had all been prearranged.

STEWART MARTIN, FORMER TIDEWAYS STRATA MANAGER: I remember that now. It was literally, here's the minutes. It's just to say that we all Yeah. Tick and flick. I wouldn't have even read 'em. The minutes are written before you get in the door.

LINTON BESSER, REPORTER: Stewart Martin is blowing the whistle on an industry riddled with conflicts of interest.

STEWART MARTIN, FORMER TIDEWAYS STRATA MANAGER: There's no doubt that Tideways and most other companies.. want a long-term relationship with big builders and developers to guarantee income further down the track. And that's an industry-wide issue. It's where the clashes start to occur.

LINTON BESSER, REPORTER: After Stewart Martin pressed the Prahran builder to address the building's defects, he says the strata manager Tideways took him off the job. He left the company shortly afterwards.

STEWART MARTIN, FORMER TIDEWAYS STRATA MANAGER: They wanted to maintain that relationship with the developer. And I was treading on too many toes by doing my job.

LINTON BESSER, REPORTER: After terminating Tideways' contract, Gavin Cooper says the owners successfully forced the builder to fix the building's major defects. In a statement, Tideways said it rejected the allegation of a conflict of interest. And was disappointed by the builder's gratuitous comment about how we were awarded the contract' Tideways says it secures work through its record of high performance, and that Stewart Martin was replaced after complaints from the Prahran Owners' Committee. The company's lawyers said Tideways had no responsibility over the leases as its role was limited to conducting the meeting and recording the minutes. Tideways takes a 20 per cent commission on its clients' insurance policies. But to secure these policies, it uses a broker in which it holds an undeclared interest called Resolute Property Protect.

LINTON BESSER, REPORTER: In its contracts Tideways is required to disclose its beneficial relationships. But here, in its agreement with the Prahran building, it reported it had no such relationships at all. Have a look? There's the section. It's completely blank. Tideways wasn't telling the truth, in fact, in addition to its 20 percent commission it was also receiving an undisclosed share of the broker's revenue.

LINTON BESSER, REPORTER: We've gone to the head of that broker's parent company to get some answers. Robert Kelly is the chief executive of Steadfast Group.

LINTON BESSER, REPORTER: Resolute Property Protect that is an example of a company, is it not, designed to channel funds back to strata managers?

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: Absolutely, absolutely.

LINTON BESSER, REPORTER: Tideways does not declare its shareholding in Resolute Property Protect. What's your reaction to that?

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: I think that that's wrong. And I think that that probably occurs, uh, and I, I, the specifics, I don't know of that, but I, I would not be surprised if in some cases they don't do that. I agree.

LINTON BESSER, REPORTER: Mr. Kelly, you're discussing this as if you are a disinterested third party. In fact, you're the managing director of one of the biggest insurance players in the strata space, if not the biggest, in joint venture arrangements with companies like Tideways. And you are saying it's not your responsibility.

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: Well, it, it is to make sure that the people that give us the instruction, we, we tell 'em about the transparency of the transaction.

LINTON BESSER, REPORTER: Well, you're not telling them loud enough, are you?

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: Well, [laugh] well, I think that's the gap. And you are, Linton, you're on the right track.

LINTON BESSER, REPORTER: Tideways told Four Corners this lack of disclosure was an honest mistake which has since been rectified.

LINTON BESSER, REPORTER: The strata industry is embarking on a major transformation. Corporate raiders now sail these seas. Emboldened by a barrage of takeovers, they're squeezing consumer choice in the chase for ever-greater profits. Even wealthy retirees like Rob Vandermeer and strata schemes like his on the Mornington Peninsula are mere cannon fodder.

ROBERT VANDERMEER, SAFETY BEACH TOWNHOUSE OWNER: It seems that every turn, we're dealing with the same group of companies. How do we know that we're getting a good offer?

ROBERT VANDERMEER, SAFETY BEACH TOWNHOUSE OWNER: About 9:30 at nighttime, just, um, excessive speed and it failed to take the corner. And we heard a loud crashing noise.

LINTON BESSER, REPORTER: Rob Vandermeer first glimpsed the industry's corporate metamorphosis after a car accident four years ago …

ROBERT VANDERMEER, SAFETY BEACH TOWNHOUSE OWNER: There was a, um, a car, uh, dangling vertically in the marina. It had gone crashing through a railing over the boardwalk, down onto a gangway. This is common property and the owner's corporation manager lodged an insurance claim with a broker.

LINTON BESSER, REPORTER: After the owners lodged the claim, they were left waiting.

ROBERT VANDERMEER, SAFETY BEACH TOWNHOUSE OWNER: Yeah, the contractor, we found out later on was Johns Lyng group which is quite strange because they're an international company involved in what was a relatively small repair, but it still took 12 months.

LINTON BESSER, REPORTER: At about the same time, Rob Vandermeer discovered his strata manager had also asked Johns Lyng to quote for the repair of a set of stairs. It's premium option was eleven stairs for $95,000.

ROBERT VANDERMEER, SAFETY BEACH TOWNHOUSE OWNER: the quote from John's Lyng was an extraordinary amount. We weren't keen to sort of spend that sort of money.

LINTON BESSER, REPORTER: When he found a cheaper alternative, Johns Lyng slashed its quote by 20 per cent.

ROBERT VANDERMEER, SAFETY BEACH TOWNHOUSE OWNER: Why would somebody just based on a phone call, cut off the price? It just defied logic.

LINTON BESSER, REPORTER: Johns Lyng says it changes its prices according to customer feedback.

LINTON BESSER, REPORTER: This was when Rob Vandermeer pieced together the puzzle. His weekender at Martha Cove had become caught in a vortex of interrelated corporations.

LINTON BESSER, REPORTER: Martha Cove's strata manager is Cambridge Management Services. Cambridge is owned by a larger company called Bright & Duggan. Bright & Duggan, meanwhile, is owned by none other than Johns Lyng, the maintenance contractor which quoted an exorbitant rate to repair the stairs. It gets worse. A major shareholder in Johns Lyng is Steadfast Group Limited, the multibillion-dollar insurance company, which also happens to own Martha Cove's insurance broker and its underwriter. Confused? Spare a thought for the owners trapped in this web, like these people here at Martha Cove. The bottom line is this: all of these companies have their hands in the owners' pockets.

DAVID HAMPTON, FORMER CEO, CHU INSURANCE: They're very murky waters, I think. I would hate to have to unpick that and work out who's getting value, is it good value?

LINTON BESSER, REPORTER: David Hampton was the chief executive of CHU Insurance when Steadfast announced it would buy the company.

DAVID HAMPTON, FORMER CEO, CHU INSURANCE: I feel sorry for those lot owners.

LINTON BESSER, REPORTER: Why?

DAVID HAMPTON, FORMER CEO, CHU INSURANCE: Well, because the propensity to, you know, collude and, and do backhanded deals in the space is very high because people don't know.

LINTON BESSER, REPORTER: When Johns Lyng bought Bright & Duggan, it told shareholders the deal was a "game changer" because it could "cross-sell" maintenance work to Bright & Duggan's buildings. But in a statement to Four Corners, Bright & Duggan insists it has no reason to believe Johns Lyng engages in "profiteering". Bright & Duggan points out that insurance commissions '… continue to be rebated … ' to owners… and says it's '…factually incorrect …' to infer any collusion between it and its associated companies.

LINTON BESSER, REPORTER: The corporate buy-up doesn't stop there. This multibillion-dollar insurance giant has found another way to extract money from apartment owners. When the funds of this strata development ran dry, their Steadfast broker found them a loan from a company called IQumulate. What the broker hadn't told them was that IQumulate was another Steadfast company.

ROBERT VANDERMEER, SAFETY BEACH TOWNHOUSE OWNER: I feel cheated because of the lack of transparency. The fact that it's kept from us, it, it just doesn't, it doesn't smell right.

LINTON BESSER, REPORTER: Why were the owners not told that the premium funder to which they were urged to go was a sister company?

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: Well, there, there, there's no necessity I suppose to do that.

LINTON BESSER, REPORTER: What the owners were troubled by is they felt they were channelled to a Steadfast company, pushing it into a policy which cost it more than what was available elsewhere.

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: IQumulate is the second largest premium funder in Australia. 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. Okay. So you are, what you're putting into me is not correct.

LINTON BESSER, REPORTER: Four Corners has confirmed with the Heads of Mathematics at the University of NSW that the annual cost rate offered by IQumulate was more than twice that of the alternative loan found by Rob Vandermeer.

LINTON BESSER, REPORTER: Independent strata manager David Wellman is breaking ranks and sounding the alarm on dwindling competition. He says Steadfast has offered his company big money to join one of its schemes.

DAVID WELLMAN, CEO & FOUNDER, WELLMAN STRATA: The offer that was made to me was to provide exclusivity over my insurance portfolio, um, whereby we would receive in return a large cash injection to our business.

LINTON BESSER, REPORTER: What kind of money are we talking about?

DAVID WELLMAN, CEO & FOUNDER, WELLMAN STRATA: Uh, between I think five to $800,000.

LINTON BESSER, REPORTER: David Wellman says part of the sales pitch was the ability to hide the income.

DAVID WELLMAN, CEO & FOUNDER, WELLMAN STRATA: the way it was sold was in effect, to allow you to bypass your disclosure obligations, allow you to go to the market or the client say on the one hand that I'm a really good guy, I'm not taking insurance commissions, but in actual fact, you are. It's hidden in secrecy.

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: That wouldn't have been from us.

LINTON BESSER, REPORTER: It was from a steadfast broking network.

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: Not from us. Whoever told you that's lying.

LINTON BESSER, REPORTER: Robert Kelly does not deny, however, that owners know little about Steadfast's deals with their strata managers to negotiate for their building's insurance.

LINTON BESSER, REPORTER: …apartment owners who hire these strata firms, many of them are none the wiser about this arrangement are they?

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: Have, have no idea. Okay. …The action goes between the Strata broker and the Strata manager.

LINTON BESSER, REPORTER: But so steadfast washes its hands of any kind of obligation to make sure owners know about this, does it?

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: Well, under, at law, you're only obliged to, to, to give the information… to, to the person that gives you the authority to place the business. And the Strata Manager is the one who, who, who in fact, um, gives the authority, authorises the insurance and, and sends the check.

LINTON BESSER, REPORTER: So, because the law isn't making you disclose it, Mr. Kelly, then you're safe not disclosing it.

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: Well, no, we do disclose it. We disclose it to the Strata Manager. But they…

LINTON BESSER, REPORTER: Then you don't disclose it to the owner, do you?

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: Well, we have nothing to do with the owner.

LINTON BESSER, REPORTER: All. And in those cases, owners are none the wiser, are they?

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: They, they wouldn't, they probably wouldn't. No, definitely.

LINTON BESSER, REPORTER: What do you think owners would say if they knew that their strata manager was out there negotiating with Steadfast to sell their future insurance policies, without their knowledge?

DAVID HAMPTON, FORMER CEO, CHU INSURANCE: There'd be absolute outrage.

LINTON BESSER, REPORTER: The head of the Australian competition watchdog, Gina Cass-Gottlieb, says insurance commissions should be banned.

GINA CASS-GOTTLIEB, CHAIR, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION: The receipt of hidden payments and commissions of whatever nature it is misleading consumers.

GINA CASS-GOTTLIEB, CHAIR, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION: Good morning to everyone..

LINTON BESSER, REPORTER: Steadfast's hold on the market has caught the Australian Competition and Consumer Commission by surprise.

GINA CASS-GOTTLIEB, CHAIR, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION:.. the growth of Steadfast has occurred below the radar. It has amassed a very significant market position with almost no notifications to the ACCC.

LINTON BESSER, REPORTER: Had Steadfast been forced to notify the ACCC of its many takeovers, its rise could've been prevented, says Gina Cass-Gottlieb.

GINA CASS-GOTTLIEB, CHAIR, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION: Informed and confident consumers benefit and are benefited by increased choice, quality and lower prices from effective competition.

LINTON BESSER, REPORTER: The federal government is currently considering this reform.

GINA CASS-GOTTLIEB, CHAIR, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION: ..we are not able to prevent those transactions which are anti-competitive because we don't see them. Steadfast is a good example of this significant problem

LINTON BESSER, REPORTER: The ACCC boss says commissions are helping drive up the cost of insurance. David Hampton agrees.

DAVID HAMPTON, FORMER CEO, CHU INSURANCE: There's too much of insurance cost that's allocated to reward the people who sell and service the product. So it could be up to 40%.

LINTON BESSER, REPORTER: One expert we interviewed told us that steadfast growth and its web of interrelated commissions and payments between its companies is one of the reasons why insurance costs have been climbing for strata.

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: No, that's complete, that's the most ridiculous statement I have ever heard anybody say in my life. And I've been in this industry 54 years. So please don't take financial advice off that person or give them any credence if anything you want to know financially meant. And because they do not know what they're talking about.

LINTON BESSER, REPORTER: He said it was, quote the most ridiculous statement he had ever heard in his life.

GINA CASS-GOTTLIEB, CHAIR, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION: Mm-Hmm.

LINTON BESSER, REPORTER: The competition reforms could come too late for people in apartments. The owners of these apartments on Sydney's north shore may have already been hit by Steadfast's market dominance. Earlier this year, Mark Swain was struck by a Steadfast broker report which recommended they use CHU Insurance, which Steadfast also owns.

MARK SWAIN, SYDNEY APARTMENT OWNER: we only were provided with one quotation. And that recommendation was that we go with CHU insurance, which turned out that they were actually a sister company with the same owner. This year's quote went up from say, 9,400 to $11,700 approximately. It was a big jump, a big, big jump.

LINTON BESSER, REPORTER: The Steadfast broker's report said a rival insurer, SCI, had withdrawn its offer to insure the building. But Mark Swain had approached SCI directly and he got a quote.

MARK SWAIN, SYDNEY APARTMENT OWNER: I actually reached out to SCI and we received a direct quotation, which was.. more cost effective than what we'd been provided by the broker. It was significantly more competitive.

LINTON BESSER, REPORTER: SCI told Four Corners it did not ever withdraw its offer of a policy, which was $3000 cheaper. In other words, the Steadfast document was false.

MARK SWAIN, SYDNEY APARTMENT OWNER: I expect the broker to go around the market and furnish us with different options. And this document that came back from the broker said, we cannot provide you those other options, which was factually incorrect in the end.

LINTON BESSER, REPORTER: The implication was Steadfast had deceived the owners to channel work to its own insurance company.

LINTON BESSER, REPORTER: Mr. Kelly, Four Corners has confirmed that is a false statement.

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: That's not true.

LINTON BESSER, REPORTER: And SCI did not ever withdraw its offer to insure that building.

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: That's not true. SCI telling a great lie about that.

LINTON BESSER, REPORTER: SCI has confirmed it did not ever withdraw that offer of insurance.

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: Well they're telling you lies. It wouldn't be the first time.

LINTON BESSER, REPORTER: are saying to me, you've got a document which will show SCI withdrawing its offer.

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: They'll be, they'll be at BCB. Yes. Absolutely. That.

LINTON BESSER, REPORTER: Okay. Okay. Perhaps you can take that on notice.

ROBERT KELLY, FOUNDER & CEO, STEADFAST GROUP: I'm, I'm happy to do it. And by the way, I'm happy to come back to you and say if I can't find one.

LINTON BESSER, REPORTER: Robert Kelly never produced that document, but later claimed the quote was either withdrawn by SCI verbally or Steadfast withdrew it on SCI's behalf. SCI says it never withdrew its offer of insurance and never authorised Steadfast to do so.

LINTON BESSER, REPORTER: NSW has the most advanced regulation of the strata industry in Australia, but the NSW Strata and Property Services Commissioner John Minns admits even NSW has failed consumers.

JOHN MINNS, NSW STRATA & PROPERTY SERVICES COMMISSIONER: Let me acknowledge this upfront that, you know, regulation of strata has been a difficult area and I think many of us would argue it's been under-regulated for a very long time.

LINTON BESSER, REPORTER: Mr Minns concedes the industry has serious conflict of interest problems, but Mr Minns has one too.

LINTON BESSER, REPORTER: Your formal disclosures to the New South Wales government contain a commitment that you sold your interest in independent property group in mid 2021. That is correct. Is it not?

JOHN MINNS, NSW STRATA & PROPERTY SERVICES COMMISSIONER: That is, that is, that is correct.

LINTON BESSER, REPORTER: Okay. Yes. And what I'm gonna put to you, Mr. Mins, is that was not true.

JOHN MINNS, NSW STRATA & PROPERTY SERVICES COMMISSIONER: The, was it, yeah, that was, was true. I am sure I can understand why you, why you're asking the question, and I am limited by, you know, by legal agreements around all of this.

LINTON BESSER, REPORTER: When he was first appointed three years ago, John Minns told the public he had 'sold his interest in Independent Property Group in mid-2021'. But this wasn't true. In fact he has continued to own a significant interest in the company.

LINTON BESSER, REPORTER: Mr. Minns, your family company, your family trust continues to own more than 500,000 shares, does it not in independent property group holdings. Is that correct?

JOHN MINNS, NSW STRATA & PROPERTY SERVICES COMMISSIONER: That is correct.

LINTON BESSER, REPORTER: When you said it was important to disclose it, where's the disclosure that you've made publicly?

JOHN MINNS, NSW STRATA & PROPERTY SERVICES COMMISSIONER: I had no obligation to make it public, and I have no intention of going further than the conversation that we've had here today.

LINTON BESSER, REPORTER: John Minns insists his disclosure to the New South Wales government was adequate.

LINTON BESSER, NSW STRATA & PROPERTY SERVICES COMMISSIONER: For the past three years, while you've been a commissioner over the property industry, you've been a shareholder in a major property and strata services company. That is an impossible conflict. Is it not?

JOHN MINNS, NSW STRATA & PROPERTY SERVICES COMMISSIONER: If the government had viewed it as an impossible conflict, I wouldn't have taken the role on.

LINTON BESSER, REPORTER: After this interview John Minns was stood aside from his position pending an investigation.

LINTON BESSER, REPORTER: In July aboard a superyacht on Sydney's glittering harbour, the strata industry held its night of nights. They're celebrating their spoils … some $7 billion a year in fees. These privateers have been largely ignored by governments allowed to run wild.

DAVID HAMPTON, FORMER CEO, CHU INSURANCE: The people that are making money this way, that way all over the place. It's just, it's just ludicrous.

LINTON BESSER, REPORTER: The NSW Government claims new laws requiring fuller disclosure of conflicts of interest will mop up the damage. The ACCC disagrees.

GINA CASS-GOTTLIEB, CHAIR, AUSTRALIAN COMPETITION AND CONSUMER COMMISSION: enhanced disclosure obligations don't get to the root of the problem, which is the financial incentive.

LINTON BESSER, REPORTER: But in most states there's almost no regulation at all.

DAVID HAMPTON, FORMER CEO, CHU INSURANCE:.. It has to change. I mean, Australia's had a housing crisis for 20 years. High density living is being advocated as the solution to that. But people hate it. A lot of people just hate living in strata. I mean, don't mention you're a strata manager at a party, no one will talk to you. The regulators have gotta get serious about this thing because it's all going to hell in the hand basket.

GAVIN COOPER, MELBOURNE APARTMENT OWNER: There needs to be some significant regulatory overhaul in the way that stratas operate.

DAVID PITT-OWEN, SYDNEY APARTMENT OWNER: Leaving it up to individual strata managers to determine their moral code just doesn't work.

LINTON BESSER, REPORTER: For the foreseeable future, millions of apartment owners have no choice but to watch their own backs.