Understanding Two-Lot Strata Schemes in NSW: Obligations and Management for Duplex Owners

5 min read

Duplexes and dual-occupancy properties often fall under two-lot strata schemes, creating a distinctive balance of autonomy and shared responsibility between owners. This overview explores the legal, financial, and administrative facets of these schemes as outlined in the Strata Schemes Management Act 2015 (SSMA).

For those who own or are considering purchasing a property in a two-lot strata scheme, grasping these nuances is crucial. This knowledge facilitates effective management and fosters cooperation, helping owners navigate the unique challenges and benefits of this property arrangement.

Two-lot Strata Schemes: An Overview of Lot Strata Schemes in NSW

Two-lot strata schemes encompass properties like duplexes or divided houses, where each unit is a distinct lot. These schemes often have minimal or no common property. The SSMA categorises schemes with 100+ lots as ‘larger schemes’, while those under 100, including two-lot schemes, fall under ‘other schemes’.

While increasingly popular, two-lot strata schemes face unique challenges:

1. Limited common property due to detached or semi-detached dwellings
2. Distinct responsibilities for insurance, maintenance, and financial contributions
3. Equal voting rights, making unanimous resolutions challenging
4. Potential unsuitability of standard model by-laws
5. Possible perception of excessive management structure and administrative costs

These factors set two-lot schemes apart from larger apartment or villa strata arrangements, requiring tailored approaches to management and governance.

Key Obligations for Two-lot Strata Duplexes in NSW

Reporting Requirements for Lot Owners

Two-lot strata schemes in NSW must fulfil annual reporting obligations. However, exemptions from reporting on capital works and combined building insurance are possible under specific conditions:

1. Buildings comprising each lot are physically detached
2. No shared structures exist
3. Owners pass a unanimous resolution to forgo building insurance and a capital works fund

This flexibility allows tailored management based on the scheme’s unique needs.

Annual General Meetings (AGMs) in a Two-lot Scheme

Two-lot strata schemes must:

1. Hold an AGM yearly
2. Complete the annual strata report within three months post-AGM
3. Include the AGM date in subsequent reports (not required for the initial report in new schemes)

These requirements ensure regular communication and effective scheme administration.

Conducting an AGM for a 2 Lot Strata Scheme

To hold an effective AGM:

1. Agree on a date, time, and location (or online platform) with the other owner
2. Ensure both owners attend or appoint a proxy
3. Follow an agenda covering:
   • Attendance and previous minutes
   • Utilities and repairs
   • Financial matters
4. Distribute minutes within seven days and maintain records for seven years

Administrative Fund for the Owners Corporation

All strata schemes, including two-lot schemes, must maintain an administrative fund for routine expenses like insurance and maintenance. This ensures proper upkeep and financial stability.

Capital Works Fund Options

Two-lot schemes with physically detached buildings can unanimously opt out of establishing a capital works fund and 10-year plan. This offers greater financial flexibility compared to larger schemes.

Insurance Considerations for 2-lot Strata

Two-lot schemes with detached buildings can unanimously decide to forgo collective building insurance, shifting responsibility to individual owners. Many choose to share insurance costs equally for simplicity.

Management and Decision Making in a Strata Plan

While simpler to manage, two-lot schemes still have administrative and safety requirements. Key points include:

1. No formal strata committee election; each lot has one representative
2. Both owners must be present for decision-making
3. Standard SSMA management duties apply

A balanced approach, such as engaging a strata managing agent with limited authority, can provide professional assistance while maintaining scheme autonomy.

Key Exemptions for Two-Lot Strata Schemes

Two-lot strata schemes enjoy several exemptions that simplify their management compared to larger schemes:

Strata Committee Formation for One Owner from Each Lot

• Committee automatically consists of one owner from each lot
• No formal election required
• For jointly owned lots, only one co-owner can represent on the committee

This streamlined approach ensures equal representation without complex election procedures.

Financial Auditing for Smaller Strata Schemes

• Audit of accounts and financial statements not mandatory for schemes with annual budgets under $250,000
• Most two-lot schemes typically fall below this threshold
• Provides administrative and financial relief for smaller schemes

Insurance Options When Buildings Are Physically Detached

Two-lot schemes may be exempt from collective insurance if:

• Buildings comprising each lot are physically detached
• No structures exist outside individual lots
• Owners pass a unanimous resolution for individual insurance and forgo a capital works fund

This flexibility allows tailored insurance arrangements suited to the scheme’s specific layout.

Fire Safety Requirements in NSW Strata

• Annual fire safety statement generally not required for residential two-lot schemes
• Owners should still ensure compliance with relevant fire safety regulations
• Consulting local council for specific guidelines is recommended

While exempt from some requirements, maintaining safety standards remains crucial.

These exemptions reflect the simpler nature of two-lot schemes, allowing for more streamlined management while maintaining essential protections.

In Summary: Managing Your Own Strata

Managing a two-lot strata scheme presents unique challenges and opportunities. Key aspects to remember include:

1. Specific reporting requirements and exemptions
2. Annual general meeting procedures
3. Flexible financial management options
4. Tailored insurance arrangements
5. Simplified committee structure

While these schemes offer more streamlined management compared to larger strata arrangements, they still require careful attention to legal and administrative details.

For property owners in two-lot strata schemes, understanding these nuances is crucial for effective compliance and management. Each scheme may have its own specific needs and challenges, so considering legal advice for your particular situation can be beneficial.

By staying informed and proactive, owners can ensure their two-lot strata scheme operates smoothly, protects their investment, and maintains positive relations between lot owners. For more information, duplex owners may consult the NSW Government’s Strata Hub or visit a Service NSW centre.