Lifestyle Communities’ business model is under serious threat after a ruling by VCAT President Justice Ted Woodward found its exit fee structure to be illegal.
The ASX-listed land lease operator, which was valued at $861.9 million and placed in a trading halt on Monday, is facing mounting legal and reputational pressure. Justice Woodward ruled its Deferred Management Fee (DMF) model was void – and the company’s policy of charging fees to dead residents was “at least harsh, if not unconscionable”.
The ruling comes after more than 80 residents of its Wollert Lifestyle Community in Melbourne’s north, took their complaints to VCAT, alleging the company’s contracts and billing practices are unlawful. The claims – first aired in an ABC 7.30 investigation and disputed by Lifestyle Communities – have significantly dented investor confidence. Before the 7.30 report, Lifestyle’s market cap was $1.53 billion.
While final orders are yet to be made, Justice Woodward is expected to formally declare that Lifestyle Communities “must not require payment of the (exit fees).”
The decision is a major blow to the company, which has always operated under a DMF model. Justice Woodward found the fees were illegal because they were calculated in a way that benefitted the operator if home values increased – but did not penalise it if values declined.
“The amount of the [fee] is neither known nor knowable when the [site agreement] is signed, or at any time thereafter up to and including when the home is sold,” he wrote.
Lifestyle Communities has 27 land lease communities across Victoria, including on the Bellarine and Mornington Peninsulas, the Bass Coast, Shepparton, Warragul and Yarrawonga. Co-founder and long-serving Managing Director James Kelly retired at the end of 2024.
