The ASX 200 real estate sector is grappling with significant turbulence today, with Lifestyle Communities Ltd (ASX: LIC) witnessing a sharp decline in its share price amid legal woes. As of early afternoon trade on Monday, shares of Lifestyle Communities have plummeted by 17.0%, trading at AU$10.46 from Friday's closing price of AU$12.57.
This decline stands in stark contrast to the broader market trend, with the ASX 200 index itself up 0.9% and hitting new record highs.
The dramatic fall in Lifestyle Communities' share price follows media reports detailing legal actions taken by residents over alleged misleading marketing practices and contentious exit fees. One resident, Geoff Gauci, expressed disappointment over what he described as misleading representations made during his purchase of a property at the Wollert development in Melbourne.
Gauci, a retired policeman, voiced his frustration, stating, "To me, it's like I'm in a financial prison. I've got to bail myself out in order to get out, and it's just wrong." His sentiments echo those of 80 other residents at the Wollert Lifestyle Community, who have reportedly filed claims against Lifestyle Communities in the Victorian Civil and Administrative Tribunal (VCAT), contesting what they view as excessive fees.
In response to the allegations, Lifestyle Communities issued a statement asserting its compliance with industry norms regarding deferred management fees, which are standard practice in Victoria and other states except South Australia. The company emphasised that all fees are transparently disclosed in its marketing materials and acknowledged by homeowners at various stages of the sales process.
Management further noted ongoing engagement with the disgruntled homeowners since February 2024 but acknowledged their decision to pursue legal action. Lifestyle Communities affirmed its commitment to defending itself against the allegations in the VCAT proceedings, maintaining that its policies align with those of other industry operators.
With today's steep decline factored in, Lifestyle Communities has experienced a significant 42% drop in its share price over the past 12 months. This downturn reflects growing investor concerns over the potential financial and reputational impacts of the legal challenges facing the company.