Lifestyle Communities residents win landmark tribunal case over illegal fees

Retirement park operator Lifestyle Communities has been dealt a crippling legal blow over the illegal fees is slugs residents.

Residents of Lifestyle Communities at Wollert have sued over the company's billing practices, including large "exit fees".

A billion-dollar, publicly-listed operator of retirement parks has been dealt a crippling legal blow, aftera judge ruled the exhorbidant “exit fees” it charged to Victorian residents amounted to an illegal profiteering scheme.

Lifestyle Communities and its subsidiaries are being sued by more than 80 residents, all with similar claims about the illegality of its contracts and billing practices.

The most significant part of the cases revolves around the company’s system of charging hefty exit fees.

But other claims also attack the company charging rent to dead tenants.

In a crucial series of preliminary decisions handed down on Monday, VCAT president Justice Ted Woodward ruled the exit fees, also known as “deferred management fees”, were illegal and that the company’s policy of charging fees to dead residents was “at least harsh, if not unconscionable”.

He is expected to formally declare later this week that the company “must not require payment of the (exit fees)”.

A Lifestyle Communities Clubhouse at one of the parks it operates in Victoria.

Justice Woodward ruled the exit fees were illegal because they were calculated using a formula that ensured the company benefited higher fees if the value of a resident’s home increased, but did not lose out if the value of a resident’s home went down.

“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,” Justice Woodward said.

Because the precise amount of the fee was never disclosed, Justice Woodward ruled the part of the contract governing the fees was void.

The tribunal ruling is expected to have a crippling effect on the company’s bottom line, the Australian Securities Exchange placing the company into a trading halt on Monday morning following a request from company secretary Anita Addorisio.

The trading halt was expected to continue until at least Wednesday morning.

The company has previously stated it makes about $13m per year from exit fees, a figure which was expected to grow significantly, as the number of parks it operated expanded in regional Victoria and on the outer fringes of Melbourne grew dramatically.

Justice Woodward also ruled the company’s practice of charging rent to dead tenants was illegal, because it was “at least harsh, if not unconscionable, essentially for reasons stated by the (residents who sued)”.

Some residents’ estates have been charged fees for up to a year while their families settle their estates, only to subsequently be slugged with higher exit fees.

The residents argued that charging rent to dead people — whose former homes could not be subleased under park rules — meant “the deceased’s estate is paying rent, fees and charges in consideration for which they receive nothing”.

In Victoria, the company has 27 retirement parks on the Bellarine Peninsula, the Mornington Peninsula, the Bass Coast, outer suburban Melbourne, Shepparton, Warragul and Yarrawonga.

In a statement, a company spokesperson said it’s lawyers were considering the decision and “its impact on the company, its communities and homeowners”.

The spokesperson said the company was “disappointed with (the) finding that certain Lifestyle Communities’ agreements should be declared void”, and was considering lodging an appeal.

“Lifestyle Communities will make a further announcement to the ASX before trading in its shares resumes on Wednesday 9 July.”