Some comments to a number of points that have been raised (long):
A . The Commercial Purpose Clause
It appears that some believe the “commercial purpose” restriction can mean DVC can prohibit any rentals or, alternatively, DVC could adopt some new, severe restrictions on rentals such as allowing only a couple per year. Those suggestions do not comply with the terms of POS documents or DVC’s own understanding of them. Moreover, to do what is suggested would actually be improper because of Florida’s highly favorable laws on the protection of rights to rent condominiums and vacation units, including timeshares. (References to POS documents herein are to the BWV POS documents.)
One needs to begin by first reading the “Personal Use” restriction in the POS that also contains the commercial purpose language. (Declarations, Article 12.1.) The first sentence is the actual definition of Personal Use and all it says is that the vacation homes “shall be occupied only as vacation accomodations.” The next sentence says that “use of the accomodations and recreational facilities 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.” That clause recognizes member’s lessees (renters) can personally use the rooms and recreational facilities.
The next sentence, which many are apparently focusing on, provides that “use of Vacation Homes and recreational facilities for commercial purposes or any purpose other than personal use described herein is expressly prohibited.” That sentence is not even talking about rentals; it is simply declaring that the vacation homes and recreational facilities cannot be physically used for any commercial purpose, i.e., it is addressing actual on-site use of the property. Consistent with that clause is that the POS has many terms concerning “Commercial Units,” which are portions of the building that are not Vacation Units or recreational facilities but instead those designated for use by businesses. Moreover, the Master Declaration of Covenants, Conditions and Restrictions (Article VII) declares that property on the site that is not designated for use as “part of a Condominium or as part of the Timeshare Plan” can be designated for use for a “commercial purpose,” again recognizing that “commercial purpose” is referring to actual use of the property on site.
The Personal Use restriction then has the sentence that declares “commercial purpose” includes a “pattern of rental activity” that the association could reasonably conclude “constitutes a commercial enterprise or practice.” What that is doing is simply adding to the meaning of commercial purpose something it otherwise does not refer to in the previous sentence, and it provides the only rental restriction that exists on the possible number of times one can rent. In other words, there is no attempt in the POS to prevent rentals, to declare that only a low or small number of rentals are allowed, or that “commercial” can mean doing any rental for profit. Also, the reference to “commercial enterprise” indicates what was intended. “Commercial enterprise” is a legal term used in statutes and codes and its accepted meaning is an entity or person that is in the business of doing something, at least part of which is to earn profits, e.g., it is not simply a member doing some rentals to cover some dues or use up points that he cannot personally use in a given year.
Other terms of the POS are consistent with that meaning. The Product Understanding Checklist I received for BWV purchases expressly declares that the member has a right to rent.
The DVC Membership Agreement included with the POS states that a “Club Member may make a reservation to use the Vacation Homes for the Club Member’s own use, make their use available to family or friends or guests, or rent them,” thus defeating any suggestion made that rental can only occur with relatives or friends. “Personal Use” is again defined in the Condominium Rules and Regulations as occupying Vacation Homes “only as vacation accomodations” by the owner, the owner’s cotenants, lessees or guests, i.e., “personal use” is referring to occupancy of a room when one is using it and does not mean one is prohibited from profiting from a rental.
Disney itself has recognized that violation of the commercial purpose clause requires a lot more than a member just doing some rentals. During the mid-2000’s, when dealing with the problem of members being in the business of doing rentals. DVC created three new rules: (a) it adopted the single transfer per use year rule (which had actually been the original transfer rule until 2003, when it was changed to allowing unlimited transfers either in or out of a membership, but not both); (b) it limited the number of associate memberships a person could have to four – members in the business of renting where using the unlimited transfer rule, and the ability to become associate members on many accounts to make reservations in those accounts, as a means to greatly increase the number of points they could control to make rentals; and (c) DVC adopted the 20 reservation rule which created a presumption of a commercial purpose violation if a member made more than 20 reservations in any given 12 month period, a presumption that could be defeated by showing the reservations were for personal use (which term itself allowed rentals). That rule itself was a recognition by DVC that the commercial purpose restriction could not be interpreted to mean rentals were prohibited or the number of rentals had to be low, i.e., DVC recognized its restriction was designed to prevent members from being in the business of renting, and was not designed to prevent members from doing some rentals to do such things as recover dues costs or use points whenb the meber could not use them for his own trips.
B. Creating New Restrictions
Suggestions are made that Disney should set limits (low) to the number of rentals a member can make, or adopt other new provisions limiting rentals. Though DVD can amend provisions without member approval under the POS, it expressly cannot do any such amendment that “would prejudice or impair to any material extent the rights of any Owner,” (Declarations, Art. XVI, sec 16.2). Florida considers the right to rent to be fundamental, to the extent that it has created laws prohibiting local government entities from creating ordinances that would prevent vacation type rooms and homes from being rented. Moreover, it has also shown that it expressly considers the right to rent to be something that cannot be easily taken away or modified. Under its condominium law – which applies to the DVC timeshares, DVD/DVC cannot change or modify the rental terms in the POS to make them more restrictive without an actual vote of the members, and all those members who vote against the new rules will not have to follow them even if passed by the required percentage of members voting in its favor . Fla. Stats. Sec. 718.110(13).
There are some limitations that already exist that negatively affect the ability to rent, although many members may not be following them. The Home Resort Rules and Regulations provide that a member cannot transfer points to another for any compensation, and thus one cannot purchase points from another to increase points that could be used for a rental. They also provide that banked points cannot be used for rentals. Also, members who join together to make reservations cannot, as a group, exceed ownership and control of more total points than allowed for a single member (currently 8,000). Another limitation is something I believe many have been ignoring. I see much discussion by members who are renting about the need to declare rental income as part of federal tax returns. I have seen very little mention about a different tax issue. If you rent your DVC interest, you must, in Florida, pay the state sales tax (6.5%) and the local transient rental tax (another 6%) on the total rental proceeds you receive. My guess is many are not paying that, but they should be because eventually that could lead to claims for back taxes and penalties.
One suggestion made above that I seriously doubt can be done is for DVC to demand that the rental agencies provide information on its rentals including the identity of the members and the rentals made. Those agencies act as go-betweens who find persons to rent from the members. They have no contracts with DVD/DVC. The ones I am aware of, contrary to what some apparently believe, do not own a lot of points that they rent and thus could be required to provide information on those. Using their own points to make a lot of reservations is something agencies stopped doing after the adoption of the 20 reservation presumption. DVD/DVC simply have no legal grounds to sue the agencies for information or to stop them from providing agency service to members.
C. The Listing of Reservations For Rental with Rental Agencies and in Facebook
Much has been said about the large number of reservations listed for rental with rental agencies and elsewhere such as Facebook. There are likely some professional renters involved with some of those listings, but I question whether it is a major problem.
For example, someone pointed out in this thread that there were a lot BCV reservations on a site and concluded there was thus a serious issue involving professional renters. However, BCV does not have an 11-month issue where reservations for studios (or other rooms) fill right at 11-months out, i.e., despite the BCV rental listings, members can usually reserve BCV as long as they do not wait too long past the 11-month window. A few months ago someone mentioned the issue of rentals of already made reservations in relation to the
DVC Rental Store. I actually went through the 585 rental listings that existed at the time on the Store’s site. The reservations covered an entire 11-month period. There were large numbers of reservations -- including at SSR, OKW, AKV Kidani, and Poly -- that were typically readily available to members at 7-months out and most of the others did not involve rooms and times with an 11-month issue where the rooms disappear quickly right at 11-months out. The total number of questionable reservations I found that actually involved rooms and times that disappear right at 11-months out was 16 out of 585. My sense is that the number of those was low because the professional renters would have the same problem getting them at 11-months out as other members.
That is just one look at the issue at one point in time for only one rental agency so I cannot definitely conclude it is only a minor problem. But we should not conclude that there is a significant professional renter problem simply because there are a lot of listings. Nevertheless, I would agree that if you have professional renters that are continuously “buying/stripping/renting/selling “ and doing mostly rentals while managing to avoid the 20 reservation issue with any single membership, that the member is likely violating the pattern of rental activity clause, although I do question whether that kind of activity can actually be financially beneficial.
An issue is what can be done about it if it is a real problem. One solution that cannot be adopted is the Wyndham solution to rentals. Wyndham created its own problem by having no maximum to the number of points a member could own, with the result that there were many members with a huge number of points (8,000,000 in one situation) making reservations for hard to get times and rooms and then renting the reservations. Members could make reservations for themselves, friends, relatives, and others. The Wyndham solution was to adopt a rule that said any reservation made that was not for the member personally could later be canceled in favor of another reservation for a member if availability otherwise did not exist. For example, if a member made a reservation well in advance as a present for his daughter on her wedding, the member and daughter could learn as late as the day of the wedding – the day before the trip to a Wyndham resort – that the reservation was cancelled in favor of another member. Fortunately, no rule like that can possibly be made with DVC because its POS clearly provides that all reservations are on a first come first served basis and DVC cannot cancel someone’s reservation to favor another.
Solutions suggesting more strict restrictions on the ability to rent have the legal issues I mentioned above, and anything created will most likely have adverse effects not just on rentals but members in general, e.g., lowering the 20-reservation presumption to 10 reservations would most likely adversely effect a large number of member’s who make ten or more reservations in a year’s period and never rent. The problem DVC has is the lack of information on whether reservations made by members are rentals and thus lacks the ability to track rentals by a member and determine whether a member is acting as a commercial enterprise. There may be no easy solution, but one possibility I thought of, but have not researched enough to determine if DVC could actually do it, is for DVC to simply adopt a rule requiring the member to provide a form that verifies whether a reservation is or is not a rental. That would give DVC information that it could collect on any given member and make evaluations as to whether there may be a violation of the pattern clause. A member could, of course, lie but discovery of the lie could itself have ramifications.
An alternative that would also provide the ability to track rental information per member is to adopt a rule requiring a member to provide a copy of the written rental agreement signed by the parties to the rental if there is a rental. Article XIII, sec. 13.2, of the declarations provides that all rentals require written agreements and have terms requiring the renter to use the Vacation Home only as allowed in the declarations. DVC could require a copy of the agreement be provided by the member to allow it to confirm the agreement meets the requirements in the declarations.
