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Is a Duplex Exempt from Strata Rules?

21 May 2014 coolangatta 0 Comment

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 :-

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 Qld?

For those in QLD, the situation is quite different and there is no formal requirements. For further information of management of a Duplex Home in QLD, please click the link below:

Management of a Duplex Home – By Barry van Heerden

We would like to thank Emma Heuston from Attwood Marshall for allowing us to publish this article.   To view similar articles relating to conveyancing and property law CLICK HERE.

 

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