The LOD collision seems to be generated by the server, so if the clients are outside LOD 0 of the server, the clients see LOD 0 but collides with the higher LOD. This at best leads to minor collision issues like client's floating and at worst infinite clipping through the map.
Here is a video of it happening. It also happens in the default example. I am using TCP multiplayer.
https://youtu.be/lNJH_lO4X5I