A different ROFR question

[jerseyduke]

If a contract is stripped, all possible points borrowed, and disney ROFR's it, how do they resell it? It doesn't have current UY points?

I know disney is required to keep 2% of points unsold, is this a place where that gets used?

 

[lovin'fl]

They don't have to wait until the contract has points, they can add current points to the contract from their pot of points.

 

[MountainMouse]

They don't have to wait until the contract has points, they can add current points to the contract from their pot of points.

I thought they could only combine contracts from the same unit. So they couldn't take points from unit 7218 and move them to 7314, for example. If they are in the same unit they can divvy up as desired. Correct me if I'm wrong.

 

[KAT4DISNEY]

I thought they could only combine contracts from the same unit. So they couldn't take points from unit 7218 and move them to 7314, for example. If they are in the same unit they can divvy up as desired. Correct me if I'm wrong.

I don't know for certain how they do it but have assumed they supplement from their own points.

In this case it's not forming a whole contract to sell - it would be the same as a transfer of home resort points which is a one time thing and doesn't matter about the unit.

 

[supersnoop]

it would be the same as a transfer of home resort points which is a one time thing and doesn't matter about the unit.

That's the same assumption I'd make. They just transfer home resort points with the same use year into the contract for the current and next use year. They can't combine contracts from different units, but we're only talking about topping up the current use year here.

 

[lovin'fl]

Agreed. And these are the same pot of points they use for the One Time Use points.

 

[wdrl]

If Disney Vacation Development reacquires a deed that is stripped of all current UY points, there are a few things it can do and a few things it cannot do.

To illustrate, let's assume DVD reacquires (either via ROFR or foreclosure) a 190-point BLT deed, Unit 87A, February Use Year, that has 0 points for 2014 UY, 40 points for 2015 UY, and 190 points for 2016 UY.

The first thing DVD will do is count all 190 points toward the 2% real estate interest at BLT that it is required to keep for itself. It doesn't matter that there are no points in some of the Use Years; DVD is still credited having those points in determining whether it has a minimum 2% holding in BLT.

By having an additional 190 points now in its holding at BLT, this means that DVD is now able to sell up to 190 other points that it has in its BLT inventory.

Because the newly reacquired deed is stripped of 2014 UY points, DVD will not be able to sell any of those points at this time. The earliest it could sell any points from this deed is beginning February 1, 2015, the start of the 2015 UY. But then, it will only have up to 40 points it could sell. It will not be until February 1, 2016, that DVD could sell the maximum of 190 points from this deed.

When it reacquires a deed, the points retain the same Use Year and same Residential Unit. These items never change during the life of the condo association. When DVD sells these Unit 87A points, they can only be combined with other Unit 87A points and repackaged into another deed of a different size. If on February 1, 2015, a buyer wanted 75 February UY points, DVD would have to have at least 35 more points already in its inventory of Unit 87A points in order to offer the buyer a single 75-point deed. If it doesn't, then DVD could offer the buyer two deeds: a 40-point deed from Unit 87A, and a 35-point deed from another BLT Unit with a February UY, such as Unit 42C.

Besides keeping the points in its inventory until they can be resold, DVD could use these points to fund cash reservations or to sell as One-Time-Use points to DVC members. DVD's usage of these points is governed by the same rules as apply to DVC members. If a cash guest wanted to book a Lake View BLT studio for 7 nights in May, it would cost the equivalent of 141 points. DVD could fund this cash stay by applying all 40 of 2015 UY points and borrowing 101 of the 2016 points. This would mean that DVD would not have any points to sell when the 2015 UY opens on February 1, 2015, and would only have 89 points left that it could sell when the 2016 UY begins on February 1, 2016.

 

[jerseyduke]

Wow, thank you for an amazing response. Confusing the first read, it made perfect sense on the second. Thanks.

 

[Dean]

If Disney Vacation Development reacquires a deed that is stripped of all current UY points, there are a few things it can do and a few things it cannot do.

To illustrate, let's assume DVD reacquires (either via ROFR or foreclosure) a 190-point BLT deed, Unit 87A, February Use Year, that has 0 points for 2014 UY, 40 points for 2015 UY, and 190 points for 2016 UY.

The first thing DVD will do is count all 190 points toward the 2% real estate interest at BLT that it is required to keep for itself. It doesn't matter that there are no points in some of the Use Years; DVD is still credited having those points in determining whether it has a minimum 2% holding in BLT.

By having an additional 190 points now in its holding at BLT, this means that DVD is now able to sell up to 190 other points that it has in its BLT inventory.

Because the newly reacquired deed is stripped of 2014 UY points, DVD will not be able to sell any of those points at this time. The earliest it could sell any points from this deed is beginning February 1, 2015, the start of the 2015 UY. But then, it will only have up to 40 points it could sell. It will not be until February 1, 2016, that DVD could sell the maximum of 190 points from this deed.

When it reacquires a deed, the points retain the same Use Year and same Residential Unit. These items never change during the life of the condo association. When DVD sells these Unit 87A points, they can only be combined with other Unit 87A points and repackaged into another deed of a different size. If on February 1, 2015, a buyer wanted 75 February UY points, DVD would have to have at least 35 more points already in its inventory of Unit 87A points in order to offer the buyer a single 75-point deed. If it doesn't, then DVD could offer the buyer two deeds: a 40-point deed from Unit 87A, and a 35-point deed from another BLT Unit with a February UY, such as Unit 42C.

Besides keeping the points in its inventory until they can be resold, DVD could use these points to fund cash reservations or to sell as One-Time-Use points to DVC members. DVD's usage of these points is governed by the same rules as apply to DVC members. If a cash guest wanted to book a Lake View BLT studio for 7 nights in May, it would cost the equivalent of 141 points. DVD could fund this cash stay by applying all 40 of 2015 UY points and borrowing 101 of the 2016 points. This would mean that DVD would not have any points to sell when the 2015 UY opens on February 1, 2015, and would only have 89 points left that it could sell when the 2016 UY begins on February 1, 2016.

Agreed, the bottom line is the contract will have to be whole to sell it. Using the example, they have essentially 2 choices. Add points from another Feb contract at BLT to make it whole sooner or rent the 40 points for 2015 and sell it starting in the 2016 UY. They could, and have for new sales, sell points and prorate the dues based on when the points were available but I'm unaware of them doing this except for "new" sales.

 

[MountainMouse]

Agreed, the bottom line is the contract will have to be whole to sell it. Using the example, they have essentially 2 choices. Add points from another Feb contract at BLT to make it whole sooner or rent the 40 points for 2015 and sell it starting in the 2016 UY. They could, and have for new sales, sell points and prorate the dues based on when the points were available but I'm unaware of them doing this except for "new" sales.

Not that it really matters much, but I like this stuff and enjoy knowing the rules. There seems to be a little difference of opinion. In wdrl's post he seems to indicate that points can't be added to a contract and sold unless they are from the same unit, not just same use year. Others think DVD can issue one time use points to top off a contract prior to selling. I'm inclined to think that since so many seem to think this that it is possible, however, it likely doesn't get conveyed as part of the deed to the property. Whether it's visible to the buyer or not I would guess it is legally separated.

 

[Dean]

Not that it really matters much, but I like this stuff and enjoy knowing the rules. There seems to be a little difference of opinion. In wdrl's post he seems to indicate that points can't be added to a contract and sold unless they are from the same unit, not just same use year. Others think DVD can issue one time use points to top off a contract prior to selling. I'm inclined to think that since so many seem to think this that it is possible, however, it likely doesn't get conveyed as part of the deed to the property. Whether it's visible to the buyer or not I would guess it is legally separated.

I too enjoy the technical discussions. Whether they do or not, I doubt any of us know for certain. There is no inherent reason they couldn't add points as long as it's the same UY and home resort and there would be no way to know as a buyer. They could do this from anything they own already that meets those criteria including unsold & retained points. Now IF there were any underlying owned unit benefit as Bluegreen has, it'd be a different ball game, but there isn't. They couldn't do so from a different UY or home resort though because you can bank up until the last day for a retail purchase and would be expecting a home resort priority if one bank any points. In the end I can't imagine DVD giving a final answer on this issue partly because I doubt they want to publicize how they do it and partly because they likely use different methods in different situations or over time. They can also use remaining points for one time rentals of 24 or less points and/or for any free extra point incentives that we've seen at times.

 

[wdrl]

In wdrl's post he seems to indicate that points can't be added to a contract and sold unless they are from the same unit, not just same use year. Others think DVD can issue one time use points to top off a contract prior to selling. I'm inclined to think that since so many seem to think this that it is possible, however, it likely doesn't get conveyed as part of the deed to the property. Whether it's visible to the buyer or not I would guess it is legally separated.

When DVD sells a deed, keep in mind that it is actually selling a "real estate interest", which is represented by DVC points. If DVD sells 190 BLT points from Residential Unit 87A, it is actually selling a 0.5432% interest in that residential Unit. DVD cannot, and does not, "top off" a deed by drawing points from other Units. Now, this should not be confused with those instances when DVD has offered developer, or incentive, points, to entice someone to buy. For example, if DVD offered a buyer 100 developer points for every 160 points purchased, the buyer would receive a real estate interest in a specific Unit that is equivalent to 160 points. But the developer points could come from any resort, Unit, and possibly even from a different UY within DVD's inventory. That is one reason why developer points usually came with restrictions like having to be used by a certain date.

 

[Dean]

When DVD sells a deed, keep in mind that it is actually selling a "real estate interest", which is represented by DVC points. If DVD sells 190 BLT points from Residential Unit 87A, it is actually selling a 0.5432% interest in that residential Unit. DVD cannot, and does not, "top off" a deed by drawing points from other Units. Now, this should not be confused with those instances when DVD has offered developer, or incentive, points, to entice someone to buy. For example, if DVD offered a buyer 100 developer points for every 160 points purchased, the buyer would receive a real estate interest in a specific Unit that is equivalent to 160 points. But the developer points could come from any resort, Unit, and possibly even from a different UY within DVD's inventory. That is one reason why developer points usually came with restrictions like having to be used by a certain date.

Do you know that or are you assuming so because of the real estate component. There would certainly be no reason they couldn't do this and stay within the structure you've outlined.

 

[wdrl]

Do you know that or are you assuming so because of the real estate component. There would certainly be no reason they couldn't do this and stay within the structure you've outlined.

Just making sure what we are taking about: Are we talking about whether DVD has the ability to sell a deed in which, for the initial year only, the points are drawn from two or more residential Units?

If that is the question, then my answer is no, I do not know that as a fact. However, if you look at DVD's pattern of selling, there is no indication that has done that. There are too many anecdotal stories about people not being able to get points from Disney until they enter the next Use Year.

But more importantly, think about the legal ramifications if Disney, or any timeshare, sold a deed that purportedly was for a specific residential Unit with a specific legal description but was actually comprised of something else. If Disney sells a deed that is legally described as 0.8147% of BLT Unit 54A, then that is what is has to give the buyer. It might seem inconsequential, or it might not be apparent to the buyer, if points were actually coming from other Units then that borders on fraud.

 

[Dean]

Just making sure what we are taking about: Are we talking about whether DVD has the ability to sell a deed in which, for the initial year only, the points are drawn from two or more residential Units?

If that is the question, then my answer is no, I do not know that as a fact. However, if you look at DVD's pattern of selling, there is no indication that has done that. There are too many anecdotal stories about people not being able to get points from Disney until they enter the next Use Year.

But more importantly, think about the legal ramifications if Disney, or any timeshare, sold a deed that purportedly was for a specific residential Unit with a specific legal description but was actually comprised of something else. If Disney sells a deed that is legally described as 0.8147% of BLT Unit 54A, then that is what is has to give the buyer. It might seem inconsequential, or it might not be apparent to the buyer, if points were actually coming from other Units then that borders on fraud.

Yes that's the question and my take is they have the ability with the qualifications noted. Potentially it could even involve 2 UY's.

My point is there is no reason they couldn't sell a contract that was made whole from another. As noted, it'd have to be the same UY and home resort OR they'd have to be clear on any variations which they've never done to my knowledge other than the extra developer points. The deed is really a technicality, many other points systems don't actually do a formal deed to the points owner. There would be no legal exclusion from making a contract whole as noted, the legal description would not be a roadblock of any type in this situation. Now IF the underlying legal ownership offered any type of access, it'd be different. Bluegreen for example gives points owners the option of taking their underlying unit or the points if done sufficiently in advance. The other potential roadblock for some systems is that they do not allow a transfer of points but DVC does.

Not to get off topic hopefully but it does lead into a fascinating discussion on the transition of OKW. In that situation the legal description likely will be a roadblock though one with potential options though they likely will include new deeds for 2057 owners in a couple of the potential scenarios.