Two Lot Strata Schemes – Understanding Your Obligations
Two lot strata schemes are very common these days, however they do present unique and special challenges compared to ordinary apartment/villa type strata schemes. These include:
- The lot owners will generally occupy separate detached dwellings (or semi-detached), limiting the common property and impacting the obligations of the lot owners responsibilities in relation to insurance, maintenance, levies and funds;
- With equal voting rights of each owner, there are often deadlocks;
- The model by-laws may not be appropriate and special by-laws should be drafted; and
- The usual management structure and resulting administration costs may be seen as unnecessary and excessive for such schemes.
Obligations under the Act
The Strata Schemes Management Act 2015 (“SSMA”) provides some special rules to assist with the management of two lot schemes:
- Section 30(3) of the SSMA (Strata Committee) – removes the need for an election of the Strata Committee for two lot schemes and states that the Strata Committee must have one representative from each lot;
- Clause 17(2)(c) of Schedule 1 of the SSMA (Quorum) – the quorum for a two lot scheme is two owners, meaning that both owners must be present to make decisions;
- Section 74(5) of the SSMA (Capital Works Fund) – provides that an owners corporation may, by unanimous resolution, decide not to have a capital works fund if the buildings comprising each lot are physically detached from each other. Also if there are no buildings or parts of buildings outside those lots (for example where there is no adjoining common property wall of the dwellings). If this resolution is passed, then it also removes the need to prepare a 10 year capital works fund plan (required under Section 80 of the SSMA);
- Section 160(4) of the SSMA (Insurance) – provides that, where all buildings are lot property (i.e completely detached), an owners corporation may, by unanimous resolution, remove the insurance obligations which the owners corporation would otherwise have in respect of building insurance. This means each lot owners can and should separately insure their own lots.
Notwithstanding the above exceptions, it is important to note that most of the management and administration requirements under the Act still apply. These include things such as compliance, reporting, maintenance, and record-keeping functions of the Owners Corporation.
Whilst many two lot schemes may prefer less formal management arrangements, you may wish to consider a compromised solution and engage a strata managing agent with a limited scope of delegated authority to assist with those functions.
We find that with many of our clients, their two lot scheme has simply adopted the model by-laws under the Strata Scheme Management Regulation 2016. In theory, it isn’t wrong, however practically speaking is not the most appropriate solution for their by-laws.
In some of these schemes, the lot owners may have separate access, strict boundaries between their lots, and little interaction with each other. This can mean the restrictive and burdensome nature of the model by-laws are generally not suitable.
We pride ourselves on providing practical solutions for two lot strata schemes, including the drafting of special by-laws tailored to meet the specific needs of each strata scheme. For example, removing the repair and maintenance obligations for detached/semi-detached dwellings in two lot strata schemes.
How can we help?
We offer a fixed fee rate for drafting by-laws. This includes the draft by-law, a motion to pass the by-law at a general meeting, and general advice on the process. We can also assist with the registration process with NSW Land Registry Services.
If you need assistance with understanding your obligations under the Act, drafting or updating your by-laws, or more general strata advice, please do not hesitate to contact us.
Disclaimer: The information contained in this article is provided as general information only. It is not intended to be legal advice and it should not be used or relied on as legal or professional advice.