This article is from the Australian Property Journal archive
SHARES in land lease communities operator Lifestyle Communities’ plunged to a near four-year low after an ABC report detailed allegations of “immoral” and “unethical” conduct, which included charging dead people rent and exorbitant charges for residents wanting to sell their home.
A group of 80 residents at its Wollert Lifestyle Community on Melbourne’s northern outskirts has banded together to lodge a claim the Victorian Civil and Administrative Tribunal (VCAT) over fees they believe are illegal and excessive.
In a statement to the ASX, Lifestyle Communities said it “rejects the allegations made in the VCAT applications and will defend them accordingly”.
“Deferred management fees are permissible in all states except for South Australia. In Victoria, most land lease operators charge a deferred management fee.”
The allegations come a few months after Lifestyle Communities launched a $275 million raising as it sought to go deeper into the land lease sector, before going on just few weeks later to downgrade its new home settlements for 2024 financial year – to which the market responded by wiping nearly one-third off its share price.
Following publication of the story yesterday morning, its share price plunged by more than 18% to $10.30, hitting as low as $10.28.
One resident at the Wollert community claimed the exit fee of selling his home was misrepresented to him, and that he was told by a representative from rival Stockland – who offered a similar home type with similar facilities at a comparable pricing nearby – that exit fees were not allowed in Victoria.
The exit fees start at 4% of the selling price and scale up the longer the person has owned the home – to up to 20% from the fifth year. Lifestyle Communities there benefits from capital gains, but doesn’t cop a loss.
The resident told the ABC he would have never bought into the community if “he knew then what he does now”.
Exit fees are worth around $13 million each year to Lifestyle Communities.
In response to the ABC report, Lifestyle Communities also posted to ASX a full transcript of its replies to questions the ABC.
Pressed on the 80 residents taking action at VCAT, it said, “All homeowners who have applied to VCAT informed Lifestyle that they clearly understood their obligations at each stage of their journey to purchase. Signed acknowledgments are a standard part of our sales process.
“The group that represents them has told us that they love living at Lifestyle Communities, they just don’t want to pay a deferred management fee and believe our model is outdated. We welcome the opportunity to resolve this matter in a legal setting.”
The ABC report also detailed the experience of the family of a deceased residents who were charged almost $12,000 in rent and increasing exit fees on a property after they were unable to find a buyer for a year after their relative’s death. The exit fee totalled more than $70,000.
A family member told the ABC they asked Lifestyle Communities to list the property for sale, and they declined.
“They said to me that it’s not in their best interest to sell the property. They blatantly told me that they had other new homes available,” the family member said.
Lifestyle told the ABC that in 2023 exiting home owners made an average profit of $79,609 after paying the exit fee.
Asked about charging rent for dead people’s homes, Lifestyle Communities’ said that in the scenario described by the ABC, “fees can be suspended immediately and accrued until the sale of a home, to be deducted from sale proceeds. No interest is charged on deferred fees.”
“Lifestyle Communities has no incentive to delay the sale of a home and the team works closely to support and advise deceased estates to ensure the home is advertised for a reasonable price and will transact quickly to avoid ongoing fees.”
The average time to resell a home in Lifestyle Communities in FY24 was 63 days.
Lifestyle Communities said the “treatment of weekly site fees for the home to occupy the site is no different than other obligations that survive death – such as body corporate fees, council rates etc, and are required as costs continue to be incurred to maintain and manage the community for the benefit of all homeowners”.
Asked whether it is “reasonable to charge dead people rent indefinitely”, Lifestyle Communities said, “There are of course outliers, and just like with any real estate transaction, realistic price expectations support the best outcomes.
“For clarity, the resale price is set by the homeowner, not Lifestyle Communities. Often deceased estates are waiting for probate. This is outside of our control and can often take an extended period.”
The ABC said some investors had been “further disquieted” by Lifestyle describing retired women, a key market, to a Macquarie investor conference audience as “Miss Lonely, Miss Homely and Miss Active” and said a marketing campaign was “targeting her between the eyes”.
“This was a generalised example to make a point about understanding a customer’s needs and serving tailored content that meets those needs. We acknowledge this was a very poor illustration of the concept. These are not terms that we use internally, and we regret using this type of language. It is not reflective of our brand,” Lifestyle Communities said.
