Aveo Class Action in Fairfax spotlight but stumbles at the starting post

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Last Saturday Fairfax’s Adele Ferguson returned in the Sydney Morning Herald and The Age to prosecute the case against the country’s No.2 village operator with the headline “Hundred sign up for second Aveo class action”.

Lawyers for Levitt Robertson are charging ahead with a class action they estimate at $30 million after securing a litigation funder and lodging formal paperwork in the Federal Court last month.

The Levitt Robinson class case is open to anyone who terminated an Aveo contract after 2015 and is specifically focuses on the company’s strategy to change freehold titles to leasehold, as part of their Aveo Way strategy.

Levitt Robinson senior partner Stewart Levitt said Aveo’s changes to management contracts had depressed resale values across Aveo villages.

“We are seeking compensation for owners and former owners, representing the difference in value of what they should have received and what they did receive, if they have sold their dwellings since early 2015,” he said.

The class action also seeks the return of sales commissions which Aveo has been charging residents to sell their units to themselves. Aveo is not alone in taking advantage of elderly people at a very vulnerable stage in their live.

Last Friday Aveo filed its defence.

For Levitt Robertson to take the action they needed a lead applicant – an Aveo customer that has had a significant loss and is typical of those the class action is to represent.

They selected the children of a now deceased Peregian Springs village (Sunshine Coast) resident, Robert Luke. He bought the freehold unit in 2003 for $270,000 and it was sold for $379,000 on a 99 year lease.

The action claims Robert Luke’s family received less from the sale because Aveo converted the title from freehold to leasehold and that Aveo failed to disclose this to them.

Aveo says the outgoing resident has the option to stay as is or take up their Aveo Way strategy of converting to leasehold by Aveo buying the unit at an agreed price and receive a number of benefits including no liability for refurbishment costs or sales commissions (up to 3%).

Levitt Robertson question the price Aveo offered (and thus Aveo’s integrity) and this Aveo Way deal.

But it seems they have their facts wrong in the Luke case. Aveo has responded:

That sale was commenced in late 2014 at a time when the Aveo Way programme had not yet been introduced to the village where the unit is located. A pre-sale estimate of the unit was prepared on that basis.  

Several months later, and after the Aveo Way programme had been introduced, the lead applicants consented to their unit being sold under the Aveo Way programme. 

That change had no impact on the price achieved which was in fact higher than the pre-sale estimate prepared prior to the introduction of the Aveo Way programme.

The Fairfax article also features Prof Murray Gillin who is one of the 200 retirees who Levitt Robinson have signed up to their class action. He was a freehold resident at Sackville Grange village in Kew (VIC).

However Prof. Gillin sold his unit as a freehold transaction in August 2016 and Sackville Grange was not offering the Aveo Way contract at that time.

It appears that Fairfax missed this detail.

The next court appearance is in March and the expectation is the Luke family claim will be struck out and Levitt Robertson will have to start again, meaning the class action will drag later into the year.