Hidden masters and death xp loss

Experience loss on death is based on what difficulty you are on. How does that work with the hidden master quests in your lair, please? If I die during a lair quest is my exp loss based on the highest difficulty level I have obtained with that character, with any character, or is it based on the level of the hidden master or even possibly which difficulty level I went to my hideout from? Any guidelines would be greatly appreciated!

Lack of community participation makes some of his quests useless.
Not a big pvp fan myself but when I've tried I couldn't get the quest complete for lack of other players participating.