Flat Chat Forum Two-unit strata Current Page

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  • #10549


    I’m new to posting on the forum, but have been an avid reader in the past.

    Does Strata law in NSW makes it mandatory for a 2 lot strata plan to maintain / take out joint SP insurances when there is virtually no common property or risk to insure? SP insurance seems a very expensive and complicated animal, with little true competition in the market. Could the individual lot owners take out their own respective home building insurance instead?  


    Scenario is as follows :

    A 2 lot suburban strata plan, with one house at the road and one on a battle-axe block.  The registered plans specify that “the walls, floors, ceilings, roofs, overhangs and structural cubic spaces of the buildings form part of the respective lots”.  The total land area is 1483m2, and the land area of each lot includes all respective fences, paths, sheds, carports, garages, driveways, power supplies, meters etc. 

    The only part of the drawn plan designated as “common property” – an area of 2m2 (0.14%) – appears to relate to an area near the road which is divided in 1/2 by a fence and where each lot has a garden and an individual water meter on their own side of the fence.  i.e. – there is no delineated “common property” in the area designated as “common property”.  As far as we can see, apart from formal easements on the legal title for drainage of sewage and water, there is nothing shared between the 2 lots at all.

    Its a simple 50:50 unit entitlement.  There is an historical anomaly that in the past the cost of joint SP insurances have been borne 60:40.   The current lot owners are friendly and are amicably discussing amending this back to 50:50 when the SP insurance next comes up for renewal, but the question about individual insurance arrangements has arisen, not for the first time.  According to the historic minutes this was mooted when the SP held its very first meeting – but lawyers for the 2 lot owners at the time didn’t seem to want to answer the question.   

    Looking forward to appropriate pointers on this.  




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  • #25179

    Many thanks Whale – very informative, and the legislative references you have provided will give us the ability to appropriately document our decision in AGM.  Pleased that common sense prevails in regulations applying to scenarios such as this.  Cheers    


    Strata building insurance is no more complicated than any other form of building insurance, although it may be more expensive if it’s organised by a strata manager, as they typically receive upwards of 20% commission from the insurer that’s then incorporated with the premium.

    The good news is that despite the lawyer’s reluctance to earlier clarify the strata insurance matter, your Scheme appears to meet the criteria for its Owners Corporation (O/C) to be exempted from the otherwise compulsory requirement to hold that type of policy, as the buildings comprising each of your lots are physically detached, and each building is contained wholly within the boundaries of its lot.

    If that’s indeed the situation, then provided your O/C (i.e. the 2 owners) unanimously resolves in that way in accordance with a motion on the agenda for its next General Meeting, then thereafter building insurance for the individual lots is at cost to and at the discretion of their individual owners.

    Incidentally, precisely the same criteria applies to the requirement for the O/C of a two lot scheme to have a Sinking Fund.

    Sect 83(4) of the NSW Strata Schemes Management Act (1996) currently applies, as will in identical terms Sect 160 of the 2015 Act that’s to be introduced this November.

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Flat Chat Forum Two-unit strata Current Page