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"NSW legislation places all Strata Schemes into essentially 2 categories - large and everything else with 2 lot schemes seemingly no longer having its own category under the latest round of legislative changes that came into effect on Nov 30, 2016.  However, 2 lot schemes DO have a few "exemptions" that the others don't and I go through them below. Large Strata Schemes are those with more than 100 lots and they also have some 'special conditions and rules' while schemes between 2 and 100 lots fit into the 'everything else' basket.  If you're involved in either a 2 lot scheme or a large scheme, some 'special provisions' have been made under the Act and you must 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."

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SMALL STRATA SCHEMES & LARGE STRATA SCHEMES

• The "sort of" 3 Categories
• The need for special provisions
• 2-lot Strata Schemes
• Are you in a smaller scheme & struggling to do it all?
• Large Strata Schemes (more than 100 lots)
• Extra information resources

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The"sort of" 3 categories

Under the Strata Schemes Management Act 2015 and the Strata Schemes Management Regulation 2016 legislation, Strata schemes fall into 2 "mentioned" categories and 1 "sort of" category.  I say "sort of" because I can't find an "official" category mentioned for 2-lot schemes BUT they ARE mentioned in a number of areas where "Special Provisions" have been made for this "2-lot scheme" group.
So, the 2 official categories are:

• Large schemes consisting of over 100 lots
• Other schemes consisting of between 2 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

Here's some Interesting Trivia for You - I received a document from Strata Community of Australia (SCA) which puts out some interesting strata stats for NSW (courtesy of NSW Land Registry Services).  Now this document was 'as at' 2nd Feb 2018 and when I get another update to these figures I'll put them here BUT, until then, here's the 'lay of the NSW (Strata)land' along with the Mar 2017 figures so you can see just how the market has grown:

As at 2nd February 2018

• 69,873 Schemes with 2-20 lots - (up 957 from 68,916 in Mar 2017)
•  5,892 Schemes with 21-50 lots - (up 322 from 5,570 in Mar 2017)
•  1,487 Schemes with 51-100 lots - (up 90 from 1,397 in Mar 2017)
•     616 Schemes with 101-200 lots - (up 40 from 576 in Mar 2017)
•     218 Schemes with 201-500 lots - (up 17 from 201 in Mar 2017)
•        9 Schemes with >500 lots     - (no change from Mar 2017)

Notice how 2-20 lots makes up almost 90% of all 78,095 strata schemes shown above (for NSW)?  That's a HUGE chunk but I wonder how many of that 90% are 2-lot schemes?  Does anybody out there know?  Oh and in case you were wondering - there's 851,024 LOTS in that lot (excuse the pun guys) which is up 26,997 from 824,027 in Mar 2017.

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The Need for Special Provisions

While it's quite obvious what some of the 'challenges' are for the very large Strata 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 Strata Committee, insurance, voting, quorums, resolutions, capital works fund, levies and disputes all take on a whole new meaning when you consider there are only two parties involved.

A scheme comprising 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 can understand 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 another at sometime or another.  Sadly, some of the larger schemes are in a state of almost constant conflict due to their sheer size.  Then of course there's the handling of a large Strata 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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2-lot Strata Schemes

The special provisions for 2-lot schemes are:

• the 2 owners automatically form the Strata Committee removing the requirement for an election.
  (See SSMA 2015 - Section 30) - especially Part 3
• If the buildings in the scheme are physically detached from each other, the owners can decide NOT to have a Capital Works Fund provided there are no additional buildings or common property in the scheme.  Both owners must decide this by unanimous resolution at a meeting.
  (See SSMA 2015 - Section 74) - specifically Part 5
• Building insurance is NOT compulsory where the two buildings in the scheme are physically detached and there are no additional buildings on common property in the scheme.  However, both owners must decide to forgo insurance cover by unanimous resolution at a meeting.  Each owner may then independently insure their own lot.
  (See SSMA 2015 - Section 160) - specifically Part 4

  A word of warning here: Be very careful with this as there are a lot of traps for the unweary.  Seek advice from a strata specialist Insurance broker before making your decision.

• Transferring money from the admin fund to the capital works fund and vice-versa does NOT seem to apply to 2-lot schemes according to the legislation.  I can understand this if there is NO Capital Works Fund to start with but what if there is one?  Then again, it doesn't say you CAN'T do the transfer...hhhmmm
  (See SSMA 2015 - Section 76).  See what you think...  Oh yeah - and any funds transferred must be paid back within 3 months.

With the advent of the compulsory 10-year Capital Works Fund Plan legislation (see SSMA 2015 - Section 80), 2-lot schemes are exempt from doing the plan if it was decided NOT to setup a Capital Works Fund in the first place (see 2nd point above), otherwise a 10 year plan will have to be done.

Finally, there are NO requirements for 2-lot schemes to have any audit of accounts and financial statements UNLESS the annual budget exceeds $250,000. (See SSMA 2015 - Section 95) - specifically Part 1.  I'm guessing that most 2-lot schemes would have annual budgets of less than $250,000 unless the scheme is a bit 'different' or 'special in some way' - like being partially or entirely 'commercial' for instance.

If you want to learn more about this whole auditing thing for 2-lot AND large schemes then hop on over to my information page on
Records & Accounts-Audit of Accounts

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Are you in a smaller scheme & struggling to do it all?

Some of the smaller-sized schemes (with from 2 to about 6 lots) can decide to head down the DIY strata management path instead of engaging a full-time professional strata manager (to initially save money) but many will eventually find the task just way too daunting and time consuming.  After all, it can be a full-time job just staying ahead of the legislative changes not to mention all the 'day-to-day tasks of running a scheme.  So, if you happen to be one of the ones that IS struggling - be aware that there ARE other options open to you that you may not have even considered - such as a Record Keeping service.

The DIY route CAN also be fraught with many hidden legal dangers especially for the inexperienced or unwary so, if you are having difficulty or are concerned, 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.  The use of a Record Keeping Service will allow you to enjoy the best of both worlds.

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

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Large Strata Schemes (more than 100 lots)

Large schemes come with a whole lot of other (and much more complex) issues - some of which are specifically addressed in the legislation that came into force from 30th Nov 2016.  So the special provisions for schemes with 101 lots or more (excluding parking and utility lots) are:

• the Strata Committee must have at least 3 members.
  (See SSMA 2015 - Section 30) - especially Part 2
• after a request is made to convene a meeting it must be held no later than 28 days after the request is made.
  (See SSMA 2015 - Section 39) - Part 3
• the estimates prepared at an annual general meeting for the levies to be paid MUST include details of items expected to cost the Owners Corporation money in the period until the next AGM PLUS any differences between the estimates and the 10-year plan along with the reasons for those differences.
  (See SSMA 2015 - Section 79) - specifically Part 6
• accounts and financial statements MUST be audited every year
  (See SSMA 2015 - Section 95)
• at least two quotations must be obtained by the Owners Corporation for items of expenditure over the current limit of $30,000
  (See SSMR 2016 - Regulation 25)
• the Owners Corporation cannot spend more than 10% above the budgeted amount for an item except for emergencies.  But, a resolution can be passed at a general meeting to remove that limitation.
  (See SSMA 2015 - Section 102)
• the minutes of all meetings must be given to any lot owners requesting them within 14 days of the request.
  (See SSMA 2015 - Schedule 1: Part 22) - scroll down to Part 22
• the secretary of the strata committee must give notice of all meetings to each owner and each strata committee member (including any tenant member)at least 3 days before the meeting.  Notice must also be given on any noticeboard if one is in use.
  (See SSMA 2015 - Schedule 2: Part 2 Section 4) - scroll down to Part 2 - Notice of Meetings and find Section 4
• the minutes of all strata committee meetings must be given to any lot owners requesting them within 7 days of the request.
  (See SSMA 2015 - Schedule 2: Part 3 Section 17) - scroll down to Part 3 - Meeting Procedure and find Section 17
• proxy votes for an Owners Corporation meeting must be provided to the secretary at least 24 hours before the meeting
  (See SSMR 2016 - Schedule 1 - Forms) - scroll down to Notes on appointment of proxies on Form 1: Note 1

The 'official' definition of a large scheme is in Section 6 of the SMAA 2015

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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 2-lot and large schemes.

Information pages, booklets, publications

• Responsibilities of the Owners Corporation
  (look for both the 2-Lot & Large schemes sections about half way down the page)
• Strata Living booklet
  (the Large & 2-lot Schemes section is on 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.

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