New Definition of Rental Activity?

[fumanchu2488]

I really suspect the average DVC member who rents out unused points every so often isn't going to have standing to sue for damages - since they'd have to show harm, and they only way that would happen is if Disney goes after the "I'm going to take a different vacation this year, so I'm going to rent my reasonable number of points for my family to a stranger" member. Which I continue to doubt will be the case ever, and if I'm wrong almost certainly won't be the case until Disney takes care of the thousands of points across multiple memberships, buy-strip-sell, I make a living off of this commercial renters. And part of me doubts Disney will take any action other than the expansion of contract language.

The low hanging fruit here is to probably clarify commercial activity. It is pretty clear from a legal perspective that the utilization of a broker to rent is considered an 'act of commercial activity'. So maybe they could just send an email to members to remind everyone that using a broker to rent points is not in accordance with our general agreement. That would probably eliminate more than half of all rental activity immediately.

 

[JackosinDIS]

The low hanging fruit here is to probably clarify commercial activity. It is pretty clear from a legal perspective that the utilization of a broker to rent is considered an 'act of commercial activity'. So maybe they could just send an email to members to remind everyone that using a broker to rent points is not in accordance with our general agreement. That would probably eliminate more than half of all rental activity immediately.

I disagree that using a broker to rent points automatically makes it a commercial activity. If anything, it’s less ‘commercial’ as you are getting a lower price for your points!

 

[Sandisw]

I disagree that using a broker to rent points automatically makes it a commercial activity. If anything, it’s less ‘commercial’ as you are getting a lower price for your points!

I agree…commercial means as a business and using a broker to find a renter does not mean you did it for business purposes.

If one owner uses a broker for one rental a year, there is no way DVC would try to say that is it.

Now, mentioning that using brokers as part of a pattern of rentals is different. It’s putting those on notice that if one is flagged it cools be a problem.

Brokers have made it much easier for owners to rent a lot and IMO, it may be just for that purpose.

 

[Brian Noble]

It might or might not be found to be "commercial" if the language were adjudicated.

But if Disney sent out the letter claiming it was, it would probably have close to the effect that @fumanchu2488 suggests. FUD works.

 

[drusba]

The problem DVD has is not just that it has created new rental rules that are contrary to prior rules, including the one that makes the DVC entities the "sole" determiners of any issue, and thus the prior "reasonable" standard has been eliminated, something DVD could not argue just provides "clarity."

There is the rental case, and then there is a case that could possibly be brought by an owner of a pre-Riviera resort who could be someone who never rents, and could make it a class action. All the pre-Riviera DVC Resort Agreements declare that BVTC, when adding a new Resort to the DVC Reservation Component, must use a DVC Resort Agreement that is "substantially similar in all material respects" to those pre-Riviera DVC Resort Agreements.

The CFW DVC Resort Agreement appears to violate that term in the prior agreements in several ways:

(a) It adds all the new rental rules to the CFW agreement and gives BVTC the power to enforce them. No such clauses exist in the prior agreements, including because BVTC never before had any power over rental issues. Moreover, the CFW Declarations state the "sole determiners" of any such rentals issues are the Board of the Association and DVCM, see CFW Declarations §12.1, meaning the Declarations and the DVC Resort Agreement contradict each other, and the clause should not even be in the CFW DVC Resort Agreement at all if the Declarations were followed.

(b) Its gives BVTC the power to do annual reallocations of points that include reallocation between room sizes, e.g., raising points year round for studios while lowering them for 2BRs. That contradicts the rules that existed before, which limited reallocations to ones designed to correct seasonal changes in demand not room size changes in demand. Moreover, BVTC itself never had any power to do any reallocations before and thus no such terms are in the prior agreements. (And noteworthy is that reallocation power cannot even be applied to CFW because the cabins are all the same size.)

(c) The prior DVC Resort Agreements declared that BVTC would not charge any individual fees for members to reserve a room from a non-owned resort through the DVC Reservation Component. The CFW agreement adds a clause that states BVTC has the discretion to create charges for reserving CFW and some other unnamed DVC Resorts.

(d) The prior agreements gave Club Members the right to use the DVC Reservation Component, and a Club Member meant only someone who has "a property interest in a Unit in a DVC Resort." Under the law a "unit" means the actual accommodations used for overnight stays. In essence the prior agreements contemplated that future DVC Resorts would be condominium resorts. The CFW agreement calls a Club Member anyone who has an ownership interest "in a timeshare estate in a DVC Resort, which is a real property interest pursuant to Section 721.05(34), Floridas Statutes." The CFW purchasers actually have no property interest in any cabin. The cabins remain owned by DVD and the members are basically sold points that, as members of the CFW association and under the Cabins Use Plan, they can use to make reservations for the cabins through the reservation systems controlled by DVCM and BVTC.

(e) The CFW agreement (and the CFW Declarations) has a new term that does not exist is any prior POS's. It provides that BVTC can accept, as new DVC Resorts, any such new resort that has an "Opening Priority Period" for up to one-year for new purchasers to have longer times to reserve rooms than other DVC members, e.g., it can add a new DVC Resort under which new purchasers of that resort can have a longer than 11-month out reservation period. And under the terms of the CFW POS in general, DVD can create new trust DVC Resorts out of any undeclared units related to prior DVC Resorts, and though reservations would be limited by the total points the members of that new DVC Resort have for those undeclared units, those points could be used for rooms already in the existing DVC Resort, e.g., if VGF still has any Resort Studios not yet declared into VGF, those could be added to a new trust DVC Resort whose new purchasers could reserve rooms at 12-months out, and thus reserve VGF studios for the hardest to get times before any regular VGF owners have a chance to make a reservation.

Thus, an action may currently be possible (including potentially a class action), that could be pursued by any pre-Riviera members who have not yet suffered any monetary harm, to seek a declaration that BVTC has violated the prior DVC Resort Agreements and, as a result, must remove CFW as a DVC Resort, a court ruling that could cost millions in losses to DVD because it would mean all CFW purchasers would be entitled to get their money back. Moreover, such action could also possibly raise the issue that the Cabins Use Plan is illegal, and thus cannot be added as a DVC Resort, because its fails to comply with the Timeshare Estate trust provisions of the Florida Statutes, which require that the accommodations (i.e., the cabins) or all rights to use them be transferred to and accepted by the trustee, here First American Trust, before sales begin. Fl Stat §§721.05(34), 721.08(c)(4), 721,53(1)(e). Such transfer has not occurred. The only thing that has been transferred to the trustee is the land lease that applies to the land on which the cabins sit, but which land lease does not include the cabins themselves.

 

[DonMacGregor]

Thus, an action may currently be possible (including potentially a class action), that could be pursued by any pre-Riviera members who have not yet suffered any monetary harm, to seek a declaration that BVTC has violated the prior DVC Resort Agreements and, as a result, must remove CFW as a DVC Resort, a court ruling that could cost millions in losses to DVD because it would mean all CFW purchasers would be entitled to get their money back. Moreover, such action could also possibly raise the issue that the Cabins Use Plan is illegal, and thus cannot be added as a DVC Resort, because its fails to comply with the Timeshare Estate trust provisions of the Florida Statutes, which require that the accommodations (i.e., the cabins) or all rights to use them be transferred to and accepted by the trustee, here First American Trust, before sales begin. Fl Stat §§721.05(34), 721.08(c)(4), 721,53(1)(e). Such transfer has not occurred. The only thing that has been transferred to the trustee is the land lease that applies to the land on which the cabins sit, but which land lease does not include the cabins themselves.

All that's needed is a law firm willing to sink the millions of dollars that Disney would likely be prepared to spend in defending any lawsuits, prosecuting such a class action claim on contingency. I'm sure they are out there somewhere, but Disney timeshare owners complaining about points renting somehow doesn't seem as sexy as mesothelioma, talcum powder related cancers, or Camp Lejeune water contamination.

ETA: IANAL, and am not opining on the legal merits of any suggested claims against DVC. I'm simply looking at the practical aspect of someone actually suing Disney over this and the likelihood that a law firm could be retained to prosecute such a claim.

 

[Nabas]

What’s the wording about commercial rentals in the original contracts?

Is Disney changing the rules or simply clarifying them?

 

[DougEMG]

What’s the wording about commercial rentals in the original contracts?

Is Disney changing the rules or simply clarifying them?

The previous rules were pretty clear: up to 20 rentals per membership in a rolling 12 month average were allowed before you were looked at as being potentially commercial. They even sent this out in letters to owners. The new rules are completely different and not a clarification.

 

[DonMacGregor]

The previous rules were pretty clear: up to 20 rentals per membership in a rolling 12 month average were allowed before you were looked at as being potentially commercial. They even sent this out in letters to owners. The new rules are completely different and not a clarification.

Where in the POS or the Master Agreements can someone find the specific reference to 20 rentals per year? Also, the clarification references in most current discussions relate to the clarification of the definition of "commercial use", "commercial enterprise" and other uses in the documents of the term "commercial".

 

[drusba]

What’s the wording about commercial rentals in the original contracts?

Is Disney changing the rules or simply clarifying them?

Read my post here which sets out the exact language that exists in the pre-Riviera POS's and my explanation of it: www.disboards.com/threads/new-definition-of-rental-activity.3939178/page-18#post-65314841

 

[Nabas]

Where in the POS or the Master Agreements can someone find the specific reference to 20 rentals per year? Also, the clarification references in most current discussions relate to the clarification of the definition of "commercial use", "commercial enterprise" and other uses in the documents of the term "commercial".

It's my understanding that Disney controls the board of the homeowners association (Buena Vista Trading Company). Presumably, they have the authority to submit revisions to the POS. For example:



And:




It looks like this revision from 3/2022 made changes that affect all DVC properties.

I'm assuming we signed something somewhere that allows the board to revise the POS, as the board sees fit. This includes the terms governing commercial use.

Perhaps I am missing something but unless the contract we sign says something different, it seems that Disney can change the POS, and these changes can affect all DVC properties, not just the new ones.

Anyone who lives in a community with a homeowners association might have encountered this sort of thing in the past. For example, the terms of the one I live in were modified several years back to expressly forbid rentals.

I'm just trying to understand why Disney cannot change the POS, given the contracts we signed when we purchased DVC.

 

[Nabas]

Read my post here which sets out the exact language that exists in the pre-Riviera POS's and my explanation of it: www.disboards.com/threads/new-definition-of-rental-activity.3939178/page-18#post-65314841

Quoting from the Florida statute you reference (for reference only):

(13) An amendment prohibiting unit owners from renting their units or altering the duration of the rental term or specifying or limiting the number of times unit owners are entitled to rent their units during a specified period applies only to unit owners who consent to the amendment and unit owners who acquire title to their units after the effective date of that amendment.​

But as you also note:

"Personal Use. Except for Units owned by DVD, which may be utilized as provided in this Declaration, each of the Vacation Homes may be occupied only as vacation accommodations. No Owner of an Ownership Interest may occupy a Unit or Vacation Home, or use any facilities of the Condominium at any time other than during the time that a Vacation Home is properly reserved in accordance with the Condominium Documents. Use of the accommodations and recreational facilities of the Condominium is limited solely to the personal use of Owners, their lessees, guests, exchangers and invitees and for recreational uses by corporations and other entities owning Ownership Interests in a Unit. Use of Vacation Homes and recreational facilities for commercial purposes or any purposes other than the personal use described in this Declaration is expressly prohibited. "Commercial purpose" includes a pattern of rental activity or other occupancy by an Owner that the Board, in its reasonable discretion, could conclude constitutes a commercial enterprise or practice. No Vacation Home may be divided or subdivided into a smaller Vacation Home. The provisions of this Section 12.1 do not apply to Commercial Units or DVD."​

​

Does this mean that when we signed our contracts, we agreed that the board has the right to define what constitutes commercial use as their "reasonably discretion"?

 

[Sandisw]

It's my understanding that Disney controls the board of the homeowners association (Buena Vista Trading Company). Presumably, they have the authority to submit revisions to the POS. For example:

View attachment 836306

And:

View attachment 836314


It looks like this revision from 3/2022 made changes that affect all DVC properties.

I'm assuming we signed something somewhere that allows the board to revise the POS, as the board sees fit. This includes the terms governing commercial use.

Perhaps I am missing something but unless the contract we sign says something different, it seems that Disney can change the POS, and these changes can affect all DVC properties, not just the new ones.

Anyone who lives in a community with a homeowners association might have encountered this sort of thing in the past. For example, the terms of the one I live in were modified several years back to expressly forbid rentals.

I'm just trying to understand why Disney cannot change the POS, given the contracts we signed when we purchased DVC.

My understanding is that if it is a material change to the POS it requires a vote

However, since the DVC resort agreement relates to exchanges between resorts, I am not sure updates to it would be considered a material changes.

I know with restrictions, they did grandfather those owners prior and then the new resorts no longer have the same language about being “substantially similar”. So, anyone buying 2019 and later enters without that language.

But, even the words “substantially similar is not “exactly the same” so it does appear there are things that could be added for new resorts that are a bit different..

Now, giving the right to BVtC to determine rules for rental and owners having no ability to expect reasonable may not be one of them..

 

[Nabas]

My understanding is that if it is a material change to the POS it requires a vote

However, since the DVC resort agreement relates to exchanges between resorts, I am not sure updates to it would be considered a material changes.

I know with restrictions, they did grandfather those owners prior and then the new resorts no longer have the same language about being “substantially similar”. So, anyone buying 2019 and later enters without that language.

But, even the words “substantially similar is not “exactly the same” so it does appear there are things that could be added for new resorts that are a bit different..

Now, given up the right to BVtC to determine rules for rental and owners having no ability to expect reasonable may not be one of them..

IMO, the wording in the original POS is wide-ranging. ("Use of Vacation Homes and recreational facilities for commercial purposes or any purposes other than the personal use described in this Declaration is expressly prohibited.") IMO, the new wording is not a material change, just a clarification.

If I have 1000 points and am renting out 100 points, a reasonable person is going to say I'm using this recreationally.

But if I have 1000 points and am renting out 900 points, a reasonable person is going to say I'm using this commercially.

If Disney pursues this (big if), I suspect they are only going to go after the most egregious commercial renters. If these cases make it court, I think the typical judge/jury would conclude that renting 90% of your points constitutes commercial use as described in the original POS. If this is the decision, then IMO Florida Statute §718.110(13) would not apply.

Disney has a history of winning these sorts of cases in the state of Florida. Not sure I'd want to go toe-to-toe with Disney.

 

[Maistre Gracey]

I find this fascinating.
I think Disney wants a do over, but finds themselves in a legal pickle. They are trying to slowly boil the frog with new definitions.

 

[Jimmy Geppetto]

IMO, the wording in the original POS is wide-ranging. ("Use of Vacation Homes and recreational facilities for commercial purposes or any purposes other than the personal use described in this Declaration is expressly prohibited.") IMO, the new wording is not a material change, just a clarification.

If I have 1000 points and am renting out 100 points, a reasonable person is going to say I'm using this recreationally.

But if I have 1000 points and am renting out 900 points, a reasonable person is going to say I'm using this commercially.

If Disney pursues this (big if), I suspect they are only going to go after the most egregious commercial renters. If these cases make it court, I think the typical judge/jury would conclude that renting 90% of your points constitutes commercial use as described in the original POS. If this is the decision, then IMO Florida Statute §718.110(13) would not apply.

Disney has a history of winning these sorts of cases in the state of Florida. Not sure I'd want to go toe-to-toe with Disney.

What about the scenario where you have 1000 points but rent out 500 of them to pay for your dues?

My DVC guide actually recommended this to me when we first bought. “buy double and rent half to pay your dues… and if you need larger accommodations in the future you will be covered”.

Fascinating is a great way to describe it!

 

[drusba]

It's my understanding that Disney controls the board of the homeowners association (Buena Vista Trading Company). Presumably, they have the authority to submit revisions to the POS. For example:

View attachment 836306

And:

View attachment 836314


It looks like this revision from 3/2022 made changes that affect all DVC properties.

I'm assuming we signed something somewhere that allows the board to revise the POS, as the board sees fit. This includes the terms governing commercial use.

Perhaps I am missing something but unless the contract we sign says something different, it seems that Disney can change the POS, and these changes can affect all DVC properties, not just the new ones.

Anyone who lives in a community with a homeowners association might have encountered this sort of thing in the past. For example, the terms of the one I live in were modified several years back to expressly forbid rentals.

I'm just trying to understand why Disney cannot change the POS, given the contracts we signed when we purchased DVC.

Buena Vista Trading Company is not the homeowners association of the resorts. It is the company that is deemed to control the DVC Reservation Component, i.e., the portion of the computer system used by members to make reservations at 7-months out for DVC Resorts they do not own. It also handles DVC trade-outs when members trade-out to non-DVC resorts, and owners of non-DVC timeshares trade into DVC. The homeowners association is the Palmetto Trust Association, Inc.

The form you include is a common form filed with the Florida Division of Condominiums,Timeshares,and Mobile Homes designed simply to provide updates on general information concerning the applicable timeshares such as identities of officers and directors, number of resorts, number of rooms, and number of members.

Under the POS documents, there are a number of terms which expressly provide that DVD has the discretion, without member approval, to change the terms, e.g., it has the discretion to change the current 11/7 month reservation schedules to different numbers but must always maintain at least a one month difference between the home resort and non-owned resort reservation times.

However, there is no such discretionary change clause attached to the terms relating to the members' right to rent rooms. There is also a specific clause in the POS that declares that DVD is not permitted to make any amendment that "would prejudice or impair to any material extent the rights of any owner." E.g., BWV Declarations 16.2. Florida law considers the right to rent to be a material right and the belief by many that DVD can make any changes it wants to make is not correct.

Moreover, the DVC resorts are all condominium resorts (other than the new CFW), and condominium law requires an actual vote of the members to amend the declarations to add any new terms that could decrease the number of times a member could rent or alter the duration of any such rentals, And even if you do such a vote and the changes are approved, all members who have voted against the changes are immune from any such changes. Fl. Stat. §731.110(13).

The pre-Riviera DVC Resort Agreements provide that any future DVC Resort Agreement entered into by BVTC has to be "substantially similar in all material respects" to those DVC Resort Agreements. And BVTC does not have any discretion to unilaterally change any of those prior DVC Resort Agreements. The only discretionary right changes granted to BVTC are: (a) it can terminate the DVC Resort Agreement if it determines that DVD, DVCM, or the association are not operating or maintaining the applicable resort consistent with the high standards of quality and customer service followed by BVTC for all DVC Resorts; (b) it can delete a DVC Resort from the group of DVC Resorts if the government takes the property via eminent domain, or the property is destroyed and cannot be repaired, and BVTC has the discretion to determine if the repairs are adequate enough to allow the resort to continue as a DVC Resort. In other words, BVTC has no discretionary right when creating a new DVC Resort, to ignore the requirement that the new DVC Resort Agreement must be "substantially similar in all material respects" to those prior DVC Resort Agreements.

Also, the Personal Use definition in the prior POS's did not give the association any power to further define what commercial purpose means in that definition. The first sentence you emphasized in your post above says nothing about rentals, it is addressing actual use of the rooms and recreational facilities for a commercial purpose, and notes the sentence does not apply to the "personal use" of the rooms and the term "personal use" itself expressly includes the right to rent and allows the lessees to occuppy the rooms."

The only sentence that deals with the right to rent is the second sentence you emphasize which adds a meaning to "Commercial Purpose" that it would otherwise not have, by stating it can include a pattern of rental activity which the board can "reasonably" conclude constitutes a "commercial enterprise" or activity. That sentence does not give the association any right to change the terms provided. It simply makes the association the entity that can determine whether a member is engaging in such improper conduct but any decision it makes must be reasonable (i.e., the member can challenge whether the association has made a reasonably correct decision). And what the pattern has to show is that member is acting as a commercial enterprise, a legal term that means being in the "business" of doing something. In other words, the association does not, for example, have the power to determine that just doing three or four rentals or rentals done to offset dues are a violation of the commercial purpose clause.

The problem with the new terms is that the association, DVCM, and BVTC are all given absolute power to determine the issue, including what a "pattern" of improper rentals are. Moreover, one should review the CFW Declarations, section 12.1. "Personal Use" in the Declarations is no longer defined as including use by lessees of the member, and the section declares any use or activity that "does not constitute personal use or constitutes commercial use is expressly prohibited." And a finding of commercial use requires no more than a finding of a "pattern of rental activity" or "frequent occupancy by others of reserved Vacation Homes, other than the Owner or the Owner's family." These are not "clarity" of prior rules. These are new rules that essentially say any "frequent" (an undefined term that the DVD entities have the sole power to dertermine what it means) reservations you make that are not for yourself or family can automatically be determined to be improper.

Moreover, there is even another reason that BVTC itself should have no right to decide rental issues. That is because the CFW Declarations declare that the "sole determiner" of any of those rental issues shall be the "Association, through the Board, or the Management Company." Declarations §12.1.4. And the only named Management Company is DVCM, id. §1.24. In essence, the controlling Declarations contradict the DVC Resort Agreement, and there should be no such terms in the DVC Resort Agreement.

 

[DougEMG]

I personally think that DVC wants the new system ala CFW to be an actual club were they set all the rules and control everything that members can and cannot do, think Club33. Next thing will be since you are only a club member there is nothing to sell or pass on to your kids since you don't own anything. Resale is eliminated, renting is eliminated, get behind on your dues and your membership is cancelled.

Now I had looked into joining Club33 back in 2019 just prior to COVID, luckily for me they did not sell it to Canadians, so I wasn't allowed to buy in. One of the issues would have been who to buy it for, my wife and I or my daughter, because if the membership was in our name, it would end once we passed away.

 

[JeffjonesHfx]

What about the scenario where you have 1000 points but rent out 500 of them to pay for your dues?

My DVC guide actually recommended this to me when we first bought. “buy double and rent half to pay your dues… and if you need larger accommodations in the future you will be covered”.

Fascinating is a great way to describe it!

In my opinion this would probably be with Disney's tolerable range, as every jurisdiction I have ever done legal work in would consider "carrying on business" as having a "view to a profit". If you are making no profit then you should not be considered to be carrying on business and the fact that DVC guides mention it as a cost cutting option is obvious to me that they see this as a legit subsidy option for owners.

I don't think Disney would be interested in splitting hairs with every owner to determine if they make $1,000 a year above their dues fees, so I think individual owners should be safe from scrutiny from Disney. I think Disney benefits from an active resale market, but just struggles to balance that with the issue of confirmed reservation rental walking for high demand rooms/dates.

Disney also has a bit of a wild card to consider as well. Will enough people be willing to buy 500 points direct from Disney at $230+ per point if the resale market was to disappear and renting points became harder to do. Do we know if Disney's ability to charge as much as they do for direct points is directly tied to the ability of people to offset their 150 direct contract with 200 - 300 resale points so the overall cost is managable. Not to metion the question of would people pay $230+ per point if future resale was non-existant, or offered pennies on the dollar 7 - 10 years down the road. Could they trigger the unintended consequence of DVC direct sale prices falling considerably, when killing the resale market. I think we have already seen a touch of this with the softness in direct sales as a result of the Riveria restrictions and the new cabins.

 

[AwfulWaffle]

I think it makes a great deal of sense to add special verbiage to this resort in particular to restrict rentals because if the traditional Fort Wilderness vacationer can just rent here then why would they ever buy here? Their target audience is the Fort Wilderness vacationer so if they can’t get them to buy then they will struggle to sell this resort even more then they already are going to so best to ensure you keep as many as cash renters in your pocket then someone else’s. Then you can jack the price and force their hands a bit if needed. Still hopeful to get in at 7 months but not holding my breath.