By John Cotter, Accredited Specialist Property Law
A great many people, including some so-called experts,
completely misunderstand the requirements of the Strata
Schemes Management Act 1996 with regard to 2 Lot strata
schemes. This misunderstanding includes what requirements do not
apply to such schemes, the circumstances in which these exemptions
apply (and, more importantly, when those exemptions do not
Exemptions relating to meetings
The easiest exemptions to understand relate to meetings of the
Owners Corporation for 2 Lot strata schemes and to the Executive
Committee of such schemes.
A quorum for a meeting of such a scheme with two owners is
always two people who are entitled to vote [Schedule 2, Clause
The Executive Committee in a 2 Lot strata scheme is made up of
The owner of each Lot that has only one owner
One co-owner of each Lot that is owned by co-owners
The company nominee of each Lot owned by a corporation
[Schedule 3, Clause 1]
Where exemptions get more detailed, and murky, however is where
they relate to levies and insurance requirements.
2 Lot strata schemes must always have an Administrative Fund,
and therefore the associated levies that go with that.
Many people, quite mistakenly, believe that all 2 Lot strata
schemes are automatically exempt from the need to have a sinking
fund and, therefore, sinking fund levies. This is, simply, not
Many people also mistakenly believe that the Owners of the Lots
in a 2 Lot strata scheme can simply take out normal
household/business insurance on their particular Lot and that no
other insurance is required.
It is true that such Owners can become exempt from the need to
have the Owners Corporation take out building insurance, but
Section 87 of the Act sets out a number of insurances that the
Owners Corporation for a 2 Lot strata scheme must still take out in
it's name, which include workers compensation insurance,
voluntary workers insurance and public liability insurance.
Owners of 2 Lot strata schemes will only be exempt from having a
sinking fund , in accordance with Section 69 of the Act, and from
the requirement to take out building insurance, in accordance with
Section 83 of the Act, if :-
The buildings in each Lot are physically detached
No building, or part of a building, is situated outside the
Lots (for example, on common property)
The Owners pass a unanimous resolution for the Owners
Corporation not to have a sinking fund and/or not to have building
insurance for both buildings.
It is vital that the requirements set out above are satisfied in
full to achieve the exemptions allowed in the Act if that is what
the Owners require. Not to do so, in relation to insurance, could
render any insurance taken out by an individual Owner void as that
Owner could be argued not to have an insurable interest, as it is
the Owners Corporation that has the insurable interest if the
correct procedures are not followed.
Another minor exemption for 2 Lot strata schemes is that there
are no requirements to have an audit of accounts and financial
statements carried out in accordance with the Australian Auditing
Standards [Section 107].
Buying a Strata Property?
If you are looking at purchasing a property in a strata scheme,
either as a personal investment or as a commercial transaction,
contact one of our experienced property lawyers on ph 02 9634 6422
for advice. Ensuring you have the right insurance and understanding
your obligations as an owner will prevent potential issues and
problems arising in the future.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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