How do I stop the characters in my dreams from turning into demons?

Whenever I lucid dream, I avoid people like the plague.

But whenever I do encounter a person, they start purposefully creeping me out by either smiling eerily and staring blankly at me.

If I dare make eye contact with them, their face starts melting and contorting into this demonic visage.

Then I wake up from nearly shitting myself, obviously.