Co-Founder and Managing Director James Kelly admits he will make changes “as appropriate” after the Deferred Management Fee (DMF) attack by the ABC.
On 13 August, Lifestyle Communities posted to the ASX a fall in operating profit after tax of 26% in FY24 of $52.9 million ($71.1 million in FY23) caused by a fall in sales of new homes and increased pre-sale and marketing costs.
In that profit is $13.2 million earned through its DMF. Lifestyle Communities was the first and one of the few land lease operators to charge this fee.
James’ justification for the DMF has been three fold. First, he says they sell their homes more cheaply to make it easier for people to enter his communities and have cash to live on. Second, his residents take all the remaining capital gain, which this year has averaged 25.9% and $87,540 per home.
And third, he believes he needs the DMF income to in part act like a sinking fund to be able to refurbish community facilities to keep them in ‘as new’ condition.
James, whose company has a portfolio of 6,653 home sites (3,860 occupied) said the ABC broadcasts had led to some customers cancelling deposits.
"We expect to get most of them back over time. Post that first week, we haven’t seen cancellation rates continue for that reason. I know we had one established home deposit cancel,” he said.
"I've actually been picking up the phone, talking directly to some of them. I’ve saved two."
James said he would be visiting every community in September and October to meet with homeowners, which he normally did every six months.
The ABC's 7.30 Report targeted Lifestyle Communities after a resident at Lifestyle Wollert complained about its DMF policy, with the broadcast titled “Financial Prison”.
"We had eight sales at Wollert in the month of June and seven of those were referred, which is sort of ironic. Interestingly enough, we've made a couple of sales at Wollert this month; you’d think we wouldn’t sell in Wollert, where all the attention was focused.”
He told The Weekly SOURCE he did not have a date for a hearing brought by 80 Wollert residents in the Victorian Civil and Administrative Tribunal.
Lifestyle Communities website is very transparent, explaining the costs, including the DMF, which is capped at 20%.
"We explain it so clearly around why it works and how we keep our entrance price so low," James said.
"I quite like the idea of having maybe an option of having to pay 20% upfront or 20% when you leave; either pay more, enjoy less, or enjoy more and pay later.”
"I know which way most people go, but it kind of then debunks the whole thesis of the story that went through the ABC saying somehow people were financial prisoners because they had to pay a DMF, where they forgot that they actually paid a very, very low going price from the get-go.
"This is where we’re sort of interested in this review to sort of get independent eyes on which is the best way to tackle this."
Victoria's Minister for Consumer Affairs Gabrielle Williams told the ABC she is developing a series of reforms, including a standardised site agreement for land lease residents.
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