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Lifestyle Communities to fight VCAT’s DMF ruling, updates contracts for new buyers

2 min read

The ASX-listed land lease community operator will appeal a Victorian tribunal ruling that struck down its Deferred Management Fee (DMF) clause – and seek a stay on the orders while the process plays out.

The VCAT decision, handed down on Monday (7 July) by Justice Ted Woodward, found that while the state's Residential Tenancies Act 1997 does not prohibit DMFs, the DMF clause in Lifestyle Communities' contracts was void due to the lack of disclosure around the precise amount on leaving the community.

Justice Woodward said the DMF must be an amount capable of being accurately calculated at the date of entry into Lifestyle Communities' Residential Site Agreements. Indexation or variation is permitted – but only if the formula is disclosed.

Lifestyle Communities told the ASX late yesterday afternoon (Tuesday 8 July) that the company had already updated its contracts for new homeowners in line with the ruling from 7 July – until the appeal is resolved.

What's changing?

  • For deposit holders and future homeowners: Lifestyle Communities will now calculate the DMF based on the purchase price of the home, pro-rated over a five-year period to a maximum of 20%.
  • For existing homeowners leaving a community: the operator will continue to operate under the existing contract arrangements, unless VCAT issues final orders directing otherwise. 
  • For deceased estates, Lifestyle Communities will no longer charge rent. Justice Woodward found that while charging rent post-death is permissible, the estate should be allowed to have someone live in the home in the intervening period, with Lifestyle Communities’ written consent – which should not be unreasonably withheld.

Shares in Lifestyle Communities were placed in a trading halt on Monday and will resume trading today. The stock last traded at $7.04 – and has nearly halved since July 2024 when an ABC 7.30 report raised concerns over its operations. Lifestyle Communities' market cap has dropped from $1.53 billion to $857 million since the broadcast.

The shares fell as much as 41% in the morning to $4.12 to close on $4.42, a 37.22% drop, in early afternoon trading. 

Analysts say the tribunal’s adverse finding is a major blow. Citi analyst Suraj Nebhani noted the operator had around $250 million in Deferred Management Fees on its books – around 30% of Lifestyle’s asset base. More volatility is expected.