Lloyd Moffatt, Managing Partner at Wickhams Hill, a research firm used by hedge funds, wrote an article published in the Australian Financial Review that was scathing in its condemnation of the Victorian land lease operator Lifestyle Communities on 16 July.
"Let’s start with the Victorian Civil and Administrative Tribunal decision at the centre of the article. Contrary to Moffatt’s characterisation, this was not a take-down of our business or the land lease model. It was a finding on the legal interpretation of one clause in our standard contract," Henry wrote.
Henry Ruiz
"The tribunal took the view that the method for calculating the deferred management fee (DMF) wasn’t disclosed with sufficient certainty under the Residential Tenancies Act. We disagree and have lodged an appeal.
"This outcome is surprising as the Victorian government’s own Consumer Affairs agency recognises the legitimacy of deferred management fees calculated on sale prices. To ensure a buyer understands the terms of a home purchase they are about to make, all potential sellers are required to fill out a mandatory form. These forms include a departure fee and the option to pay based on a percentage of 'entry price' or 'sale price'.
"In addition, Lifestyle Communities has had its contracts reviewed by legal advisers many times over its 20-plus years of operation to ensure they are permissible. We take legal compliance seriously and have always acted in good faith. We operate in a regulated industry and have disclosed our fees clearly in accordance with guidelines issued by Consumer Affairs Victoria."
ABC 7.30 reported in a story called "Financial Prison" in July last year 80 residents at Lifestyle Communities Wollert had taken the operator to VCAT, alleging their contracts are unfair and challenging the legality of the exit fee (DMF) in light of a previous win in VCAT in 2018 and a series of settlements including a Consumer Action Law Centre action regarding another operator.
The Housing for the Aged Action Group (HAAG) believes charging exit fees on the sale of a house in Victoria is a breach of the legislation. They say it is illegal. HAAG allege under s206S of the Residential Tenancies Act, the charge has to be specified precisely.
"The suggestion that we have somehow misled thousands of uninformed Australians, along with their lawyers and families, does not align with the facts of our comprehensive disclosure process," Henry continued.
"Our model is simple and transparent. Homeowners pay a lower entry price than comparable homes in the same area. They enjoy high-quality homes, community amenities, and maintenance-free living. The deferred management fee is the balance – paid when they leave, based on a fixed percentage of the resale price of their home.
"To call this 'incalculable' or 'Kafkaesque' is wilful misrepresentation. In fact, it’s this model that has allowed thousands of Australians to access secure, affordable housing at a time in their lives when it matters most. ...
"The tribunal ruling will have implications for the sector, and we are taking it seriously. But let’s be clear: this is not the unravelling of an industry, nor the unmasking of a monster. It is a moment for regulatory clarity, responsible commentary and sensible policy. Context matters. It is a well-trodden path to have research firms characterising Lgood businesses in an unfavourable light, especially when they are known to work with short sellers."
Lifestyle Communities' market capitilisation on Monday was $551.48 million. In July last year when the ABC story was broadcast it was $1.53 billion.
