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Lifestyle Communities (ASX: LIC) has decided to no longer charge rent on deceased estates, but the land lease community developer will stick to its guns on existing exit fee policies as it prepares to appeal a recent tribunal decision that rendered the contract clause that covers them void.
On Friday the company revealed that Justice Woodward from the Victorian Civil and Administrative Tribunal (VCAT) had stayed orders that the deferred management fee (DMF) clause in its contracts with residents was void, pending an appeal that Lifestyle Communities has until 5 September to lodge.
The judge ordered that whilst the Residential Tenancies Act 1997 (Vic) does not prohibit a DMF, it must be able to be accurately calculated at the time of signing a contract. In contrast, LIC's fees start at 4 per cent of a property's sale price and rise in increments to 20 per cent over five years.
As an example this means the company would take a $100,000 cut on a $500,000 property sale, even if it were only initially purchased for $300,000.
Following the ruling the company's new CEO Henry Ruiz expressed disappointment at the decision, reiterating the LIC's belief in the model "as it practically lowers the entry costs for downsizers in the midst of a well-documented housing affordability crisis and helps release equity from their homes to boost their savings and improve living standards in retirement".
LIC agreed to orders that it no longer charge rent on deceased estates, claiming it had already considered doing so.
"Following the release of Justice Woodward’s reasons, Lifestyle Communities made the commercial decision to cease charging fees for services provided to deceased estates and submitted that should be reflected in the orders (and not a requirement that the estate should be permitted to have someone live in the home until it is sold)," the company said in an ASX statement.
"As noted in our 8 July release, Lifestyle Communities intends to appeal the decision with respect to the enforceability of the DMF clause in the RSA (residential site agreements).
"The interim stay means the orders in relation to the DMF clause do not come into effect while the stay is in place. Practically, that means Lifestyle Communities can continue to charge the DMF while the stay is in place but intends to quarantine these funds until the appeal is determined."
LIC notes a hearing date has been set for 27 August 2025 to hear submissions on a longer-term stay requested by Lifestyle Communities that the relevant orders remain stayed.
"If granted, the longer-term stay would remain in force until the appeal is decided," the company said.
"The interim stay will remain in place until a determination on the longer-term stay is made by His Honour."
LIC shares plummeted 38 per cent following the VCAT decision shaving off $325 million in value. After dropping to a share price of $4.42, it has since risen slightly to $4.71 - a level still well short of the $7 mark prior to the ruling.
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