Do two-lot strata schemes need a capital works fund?
NSW owners corporations must normally keep a capital works fund and 10-year plan, but a two-lot scheme can resolve not to (s 74(5)). What that means, how to decide, and how to record it properly.
A capital works fund (the old "sinking fund") is money set aside each year for the big-ticket items — roof, repainting, driveway — so nobody gets a $20,000 bill out of the blue. Larger schemes must have one and a 10-year plan to go with it. Two-lot schemes get a choice.
The rule
Under s 74(5) of the Strata Schemes Management Act 2015, an owners corporation of a two-lot scheme may resolve not to establish a capital works fund if the buildings are physically detached and no building is on common property — and, more broadly, two-lot schemes have long been treated as able to opt out where the owners agree to meet capital costs as they arise. Once the small-scheme rules commence, that decision is a written resolution both owners sign. Whichever way you go, it needs to be recorded.
Option A — keep a fund
- Both owners contribute a set amount each year, by unit entitlement, into an account in the owners corporation's name operated by both owners.
- Suits attached duplexes with a shared roof and older buildings.
- Needs a simple 10-year estimate of what's coming up — we prepare a one-page version.
Option B — no fund, pay as you go
- Nothing set aside; when the roof needs doing, both owners pay their share of the quote directly.
- Suits detached homes on one plan, newer buildings, and owners who'd rather keep control of their own savings.
- The risk is obvious: a big repair coinciding with one owner being short of cash.
How to record it
Either way, the decision is a written resolution: "The owners corporation resolves under s 74(5) not to establish a capital works fund and to meet capital expenditure as it arises, shared in proportion to unit entitlement" — or the equivalent for keeping one, with the annual amount. Both owners sign; the resolution is kept with the scheme's records. It should be revisited when a lot sells or the building's condition changes.
Where should the fund money be held?
In a bank account in the owners corporation's name ("The Owners – Strata Plan No. XXXXX"), operated by both owners. Not in one owner's personal account, and — under Duplex Strata — not with us; we hold no scheme money.
Do we need a formal 10-year plan?
If you keep a fund, the Act expects a plan of anticipated major expenditure over 10 years. For a duplex a one-page table is sufficient and we prepare it as part of the annual budget resolution.
We opted out years ago — do we need to do anything?
Check that the decision was actually recorded. If it lives only in someone's memory, record it now in a written resolution both current owners sign.
- 1 October 2026: two-lot schemes stop lodging the annual Strata Hub report (NSW Fair Trading, "Changes to strata laws").
- Small strata scheme rules (no meetings, decisions by written resolution of both owners, new s 7A): in a Bill that has passed the Legislative Assembly and is before the Legislative Council. They start on a date to be proclaimed. Until then, where the law still requires a meeting we hold a short online one for you at no extra cost.
- Unchanged: the duty to insure the building for full replacement value in the owners corporation's name, to keep common property in repair, to keep a strata roll and records, and to provide a Section 184 certificate when a lot is sold.
No meetings, no commissions, no money handled. Both owners sign online.