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"NSW legislation places all strata schemes into 3 categories - small, large and everything else.  Small schemes consist of 2 lots, large schemes are those with more than 100 lots and those between 3 and 100 lots fit into the 'everything else' basket.  If you're involved in either a small scheme or a large scheme, some special provisions have been made under the Act and you should familiarise yourself with them.  I've put together a quick summary of what you need to know and I've also included some outside reference sites to help fill in any gaps on this small yet important topic."

SMALL STRATA SCHEMES & LARGE STRATA SCHEMES

• The 3 Categories
• The need for special provisions
• Small Schemes (2 lots)
• Are you in a smaller scheme & struggling with Strata Management costs?
• Large Schemes (more than 100 lots)
• All other requirements....
• Extra information resources

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The 3 categories

Under the NSW Strata Schemes Management Act 1996 and the NSW Strata Schemes Management Regulation 2005 legislation, Strata schemes fall into 3 categories:

• Small schemes consisting of 2 lots
• Large schemes consisting of 101 lots or more
• Other schemes consisting of between 3 and 100 lots (inclusive)

IMPORTANT - When determining which category your scheme falls under, make sure you count ONLY the lots allocated for human occupation and NOT any parking or utility lots

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The need for special provisions

While it's quite obvious what some of the 'challenges' are for the very large schemes (both in financial and people-handling terms), it may not be so clear that owners of 2-lot schemes face their own set of unique problems.

For example, things like the Owners Corporation and Executive Committee, insurance, voting, quorums, resolutions, sinking funds, levies and disputes all take on a whole new meaning when you consider there are only two parties involved.

A scheme containing 10, 20, 30 or more owners will need to handle all the above things quite differently to a scheme having just 2 owners.  Now you see why some special regulations had to be drawn up to cover the somewhat unique issues that arise when there are only 2 owners.

Similarly, when you throw 100 or more owners in together it's almost guaranteed there's going to be a certain degree of fireworks over one thing or the other at sometime or another.  Sadly, some of the larger schemes are in a state of almost constant conflict due to their sheer size.  Then there's the handling of a large scheme's finances which can run into the millions of dollars each year.  Some controls had to be put in place to assist in the administration and safeguarding of such large amounts.

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Small Schemes (2 Lots)

The special provisions for 2-lot schemes are:

• the 2 owners automatically form the Executive Committee removing the requirement for an election
• a quorum for all meetings is when the 2 owners are present
• Building insurance is not compulsory where the two buildings are detached and there are no additional buildings on common property.  However, both owners must decide to forgo insurance cover by unanimous resolution at a meeting.  Each owner may then insure the structure on their own lot.
• If the buildings are detached, the owners can decide not to have a sinking fund provided there are no additional buildings on common property.  Both owners must decide this by unanimous resolution at a meeting.

With the advent of the compulsory 10year sinking fund plan legislation, 2-lot schemes managed to get special consideration.  Essentially, a 2-lot scheme doesn't need to have a sinking fund - however there are conditions to this.  Read the section on 2-lot schemes in the Office of Fair Trading's information sheet covering Sinking Funds.  You'll find it about 3/4 of the way down the page.

Section 69 of the NSW Strata Schemes Management Act 1996 also makes reference to this.

Are you in a smaller scheme & struggling with Strata Management costs?

Some of the smaller-sized schemes (with from 2 to about 6 lots) can find the cost of engaging a full-time professional strata managing agent a bit prohibitive as many agents have a minimum yearly management fee.  This results in some of these schemes opting to take the do-it-yourself path unaware there ARE other alternatives open to them.

The DIY route can be fraught with many hidden dangers especially for the inexperienced or unwary so, if you are thinking of DIY, make sure you read the Do-it-yourself Strata information page and explore the available alternatives first.

Take particular note of the Record Keeping Service option which is very popular amongst schemes with between 2 and about 6 lots - although there are schemes with more than 6 lots successfully using the Record Keeping Service.

If you're unsure which way to go, discuss your scheme with someone experienced in this arena.  You can make a no obligation enquiry on that same webpage.

TIP - To come back to this page (when you're finished) simply hit the BACK button until you return.

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Large Schemes (more than 100 lots)

The special provisions for schemes with 101 lots or more are:

• financial accounts must be audited every year
• annual budgets must list amounts expected to be spent on specific items
• at least two quotations must be obtained by the Owners Corporation for items of expenditure over $25,000 (which is the official limit in 2008)
• Executive Committees of large schemes are not permitted to spend more than 10% above the budgeted amount for any item, except for emergencies
• proxy votes for an Owners Corporation meeting must be provided to the secretary at least 24 hours before the meeting
• notice of all upcoming Executive Committee meetings and the minutes of these meetings must be given to all lot owners.  The issuing of such notice via the scheme's noticeboards is not acceptable.

The NSW Office of Fair Trading has a discussion paper in their files which looks at the problems of large schemes (amongst many other things) and it makes interesting reading for those with an interest in this area.  The paper is titled "Living in Strata Developments in 2003" and while it's getting on in age it was no doubt the basis for some of the legislative changes implemented in 2005.  Specifically, Section 6 is headed Large Schemes - should they be treated differently? and is the one to read.

TIP - You can find the section quickly by typing large strata schemes into Adobe's search box in the top right corner of the PDF document and pressing enter.  The first occurrence found will be the Index reference and pressing enter again will take you straight to the section.

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All other requirements....

Regardless of the size of the scheme, the Owners Corporation is responsible for maintaining all the records and accounts and attending to all other requirements as detailed in the NSW Strata Schemes Management Act 1996 and the NSW Strata Schemes Management Regulation 2005 legislation.

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Extra information resources

Here are a couple of extra resources to help you understand exactly what you must know regarding the special provisions for small and large schemes.

Information pages, booklets, publications

• Responsibilities of the Owners Corporation
  (look for the Large schemes section on page 2)
• Strata Living booklet
  (look for the Large Schemes section - about page 17)

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Strata Title Terms and Jargon

If you need to know the meaning of one or more of the common terms mentioned above then have a look at the Strata Terms and Jargon Information page.

What is strata?
Strata terms and jargon
Frequently Asked Questions
Do-It-Yourself Strata
Strataman News
Helpful Websites

Buying a strata titled property
Buying "off-the-plan"
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Compliance issues
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Insurance requirements
Legal advice
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Strata trades guide
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