Is a Duplex Exempt from Strata Rules?

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For many retirees the purchase of a duplex (or 2 lot strata scheme) is a perfect compromise between a unit and a house – low maintenance living with more privacy than a retirement village or unit.

However, this is not always the case and in New South Wales, confusion sometimes arises as to whether duplex owners (or owners in a two lot strata scheme) must comply with the strata rules set out in the Strata Schemes Management Act 1996 (Act).

Many owners in 2 lot schemes are of the mistaken belief that they don’t need to establish any records and their strata obligations consist solely of paying the annual insurance premium jointly with the other lot owner.

This is not the case and there can be serious insurance consequences if the owners in a 2 lot scheme do not comply with the Act.

There are partial exemptions for some 2 lot strata schemes however these exemptions only relate to the sinking fund budget and building insurance. We draw your attention to the following exemptions and obligations:

Administrative Fund Compulsory

Regardless of the building configuration (that is whether there is a common party wall or the buildings on the respective lots are physically detached) 2 Lot strata schemes must always have an Administrative Fund, and therefore the associated quarterly levies that go with that fund.

Sinking Fund Requirements / Exemptions

2 Lot strata schemes are not automatically exempt from the need to have a Sinking Fund and associated quarterly levy. A 2 Lot scheme will only be exempt from the requirement to operate 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); and
  • the owners of both lots pass a unanimous resolution for the Owners Corporation not to have a sinking fund and/or not to have building insurance for both buildings.


Insurance

Finally, many owners in 2 Lot strata schemes hold the mistaken belief that each lot owner can simply take out normal household/business insurance on their individual Lot and that no other insurance is required.

It is true that owners can be 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 its name, which include workers compensation insurance, voluntary workers insurance and public liability insurance.

Owners in 2 lot schemes (and prospective purchasers of such schemes) must be mindful of these requirements. If the correct insurance policies are not taken out, any insurance taken out by an individual lot owner may be void as the insurance company providing that insurance may consider that the owner did not have an insurable interest because it is the Owners Corporation (rather than the Owner) who has the insurable interest.

What is the situation in Queensland?

For those in Queensland, the situation is quite different and there is no formal requirements. For further information of management of a Duplex Home in QLD, please contact our Property & Commercial Department Manager, Jess Kimpton, on direct line 07 5506 8214, email jkimpton@attwoodmarshall.com.au or free call 1800 621 071.

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Jeff Garrett - Legal Practice Director - Wills & Estates, Estate Litigation, Property & Commercial, Compensation Law, Commercial Litigation, Criminal Law, Racing & Equine Law

Jeff Garrett

Legal Practice Director
Commercial Litigation, Compensation Law, Criminal Law, Estate Litigation, Property & Commercial, Racing & Equine Law, Wills & Estates

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Disclaimer
The contents of this article are considered accurate as at the date of publication. The information contained in this article does not constitute legal advice and is of a general nature only. Readers should seek legal advice about their specific circumstances. 

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