Contract Expiration / Dues Payment

[RachStu]

Can anyone assist with questions re contract expiration?

We have a December use year. We own at a few resorts, but taking SSR as an example when will our last allotment of points be and when will the last bill for management fees / annual dues be issued? Am I correct in thinking the last allotment of points will be 1 December 2054 and the last management fees / annual dues will be payable in January 2058. This would mean that we have up to 30 November 2055 to use our last allotment of points.

 

[D-Trick]

The truth is no one knows because we haven't had any contracts expire yet. DVC may impose banking/borrowing limits as we get closer and/or maybe we pay a prorated month's worth of dues? Anyone's guess.

SSR expires 2054, so last allotment of points per your example is Dec 2053. You would not be able to use past January 2054 since the contract expires. Yes, you would only have 2 months to use the points-- but that's all we know as of now. As said before, no one knows how it will actually work since that's uncharted territory.

 

[RachStu]

Thanks. I’ve updated my initial post with the correct date. Am blaming jet lag for my mistake!

The reason I’m asking is I seem to have a different opinion to most as to how use years and annual dues match up. Take the Dec 2022 allocation of points for example. For all intents and purposes, these can’t really be used during 2022 aside from during December. It doesn’t make sense to me that the Jan 2022 dues are for the Dec 2022 points. Those dues are to maintain the property during a time when only the Dec 2021 points can really be used.

This matters when it comes to making offers on points. I’ve bid on quite a few contracts recently which have zero December 2022 points, but the broker has argued on behalf of the seller that the seller should be reimbursed for the January 2023 dues. When I’ve countered that I can’t use the resort during 2023 as the contract won’t have any points until Dec 2023, the answer has been “but you can borrow from the Dec 2023 points and use them earlier in the year”. Obviously that argument falls by the wayside if the last allotment of points is Dec 2053 and the last annual dues payment is Jan 2054.

For full disclosure, this was the explanation I got:

As a former direct DVC Sr sales guide for many years over 25 actually, it's been my experience that Dec use year has always caused some confusion and the fact that the dues are billed a year in advance confuses many, no worries.

As members can borrow the next year's points, DVC Member Accounting bills for the future year at the end of the current year. If you think about it, if they didn't do that there could be problems w/borrowing at some level. The reason for the dues to be billed a year in advance is to cover the security of the point allocation. It's been this way since day one from the inception of the club. If you think about it, in 2022 you could have borrowed 2023. But members were billed in 2021 for the 2022 pts, and in 2022 for the 2023s. This Dec the dues will bill for 2024, a buyer can pay w/in the grace period and it flows into Jan.
.
So to be accurate the dues members pay as in this coming December when the dues are ratified by Disney and the bills go out, are for the future year Dec 2024 points. This is why members are turning down offers from buyers asking them to pay the 2023 dues on the points they are giving way, doesn't make sense to them if they are giving the 2023 points up, nor should it to you if you were selling. And the 2023s can be banked.

You can look at it in different ways but DVC member accounting will be billing for the 2024 dues this late fall not the 2023 ones. So to a buyer's benefit any 2022 points you can get on a listing are 'freebies' as far as no dues on those points as they were paid long ago, and the member is giving up the 2023 allocation but the buyer has to pay for those. Members get reimbursed at closing for the points they are giving up. Disney is the one requiring resale members to pay the 2023 dues upfront at closing at this time, as the sellers then get reimbursed for the 2023 points they have paid 2023 dues on. Disney and our company make sure no dues are in arrears. If a seller failed to pay any 2023 dues, it's caught in an audit prior to closing day and if needed removed from the seller's proceeds at closing.

What are people’s thoughts? Whilst it’s obviously at everyone’s discretion, do buyers of December contracts typically pay the Jan 2023 dues when the December 2022 points have been used?

 

[intamin]

Thanks. I’ve updated my initial post with the correct date. Am blaming jet lag for my mistake!

The reason I’m asking is I seem to have a different opinion to most as to how use years and annual dues match up. Take the Dec 2022 allocation of points for example. For all intents and purposes, these can’t really be used during 2022 aside from during December. It doesn’t make sense to me that the Jan 2022 dues are for the Dec 2022 points. Those dues are to maintain the property during a time when only the Dec 2021 points can really be used.

This matters when it comes to making offers on points. I’ve bid on quite a few contracts recently which have zero December 2022 points, but the broker has argued on behalf of the seller that the seller should be reimbursed for the January 2023 dues. When I’ve countered that I can’t use the resort during 2023 as the contract won’t have any points until Dec 2023, the answer has been “but you can borrow from the Dec 2023 points and use them earlier in the year”. Obviously that argument falls by the wayside if the last allotment of points is Dec 2053 and the last annual dues payment is Jan 2054.

For full disclosure, this was the explanation I got:

As a former direct DVC Sr sales guide for many years over 25 actually, it's been my experience that Dec use year has always caused some confusion and the fact that the dues are billed a year in advance confuses many, no worries.

As members can borrow the next year's points, DVC Member Accounting bills for the future year at the end of the current year. If you think about it, if they didn't do that there could be problems w/borrowing at some level. The reason for the dues to be billed a year in advance is to cover the security of the point allocation. It's been this way since day one from the inception of the club. If you think about it, in 2022 you could have borrowed 2023. But members were billed in 2021 for the 2022 pts, and in 2022 for the 2023s. This Dec the dues will bill for 2024, a buyer can pay w/in the grace period and it flows into Jan.
.
So to be accurate the dues members pay as in this coming December when the dues are ratified by Disney and the bills go out, are for the future year Dec 2024 points. This is why members are turning down offers from buyers asking them to pay the 2023 dues on the points they are giving way, doesn't make sense to them if they are giving the 2023 points up, nor should it to you if you were selling. And the 2023s can be banked.

You can look at it in different ways but DVC member accounting will be billing for the 2024 dues this late fall not the 2023 ones. So to a buyer's benefit any 2022 points you can get on a listing are 'freebies' as far as no dues on those points as they were paid long ago, and the member is giving up the 2023 allocation but the buyer has to pay for those. Members get reimbursed at closing for the points they are giving up. Disney is the one requiring resale members to pay the 2023 dues upfront at closing at this time, as the sellers then get reimbursed for the 2023 points they have paid 2023 dues on. Disney and our company make sure no dues are in arrears. If a seller failed to pay any 2023 dues, it's caught in an audit prior to closing day and if needed removed from the seller's proceeds at closing.

What are people’s thoughts? Whilst it’s obviously at everyone’s discretion, do buyers of December contracts typically pay the Jan 2023 dues when the December 2022 points have been used?

I think you’re getting mixed up on the timing of the dues.

Dec 2022 points were already paid for in January of 2022.

Points coming in Dec 2023 are paid for in January of 2023. These points will be able to be used from 12/1/2023 to 11/30/2024 unless banked of course in which case they’d expire 11/30/2025.

Part of the joys of having a DEC UY is you get to give your money 11 months in advance to Disney to points you won’t be able to use yet.

Also nobody is paying dues in Jan. 2054 as nobody will be receiving points in 2054 at SSR, at least not on any currently existing contracts. The last time you will pay dues is Jan 2053 for points coming in Dec 2053 which I imagine most people with a Dec UY will borrow so they can borrow their points into the Dec 2052 UY.

 

[happythoughts & pixiedust]

I doubt there will be an annual dues payment in Jan 2054. Dues cover maint for that particular calendar year, and the contract will be expired Jan 31, 2054, and so will your ownership. You have no obligation to maintain the property after that point in time.

It's possible that Dec. Use years might only have 2 months to use their points up - we don't know yet.

The way I look at it, dues are an owner obligation separate from use year. Disney will only bill you dues based on how many months of the year you've owned your contract. So if you buy a Sept Use year today, you'll get full 2022 points (which you can bank) and pay no dues on them. You'll also get full 2023 points available starting this Sept, and you'll only owe dues for 8 of the 12 months of this year.

Everything about a resale offer is negotiable, but the generally accepted practice is that buyers pay the dues for remaining points in the calendar year. So if there's 2023 use year points and you're buying the contract in 2023, you pay the dues on whatever points remain in 2023, regardless of Use Year.

If you don't want to have to pay those dues, you can simply factor that into your offer price instead. What's giving seller's pause is the fact that the dues payment terms you propose are somewhat unconventional.

At the end of the day all that matters is the net price per point you get to, including closing costs. Depending on broker and size of contract, closing costs can vary as much as $4 per point.

Also keep in mind the calculus between resale and direct has also changed with the increase in interest rates. Today, if I can buy 200 direct Grand Floridian points for $197 with incentives, but also save $2 on the 2023 dues (vs. a resale contract that had full 2023 points because direct will be prorated by month), that brings me to $195. But I also get full 2022 points, which could rent for at least $15, which compared to a resale contract with full 2023 points and 0 2022 points, would look more like $180/pt. You can also buy the direct contract on a credit card which can get you a sign up bonus, and often 0% interest for 12+ months. Now that interest rates are 4.5-5%, if you've got the cash, you can earn almost $10 per point in interest over the next year while your money sits in the bank until you pay off your 0% credit card in 12-18 mo.

So now, you're looking at ~ $170 as your net price for direct points vs. a resale contract that has no 2022 points, but full 2023 points. If it's missing the 2023 points, the direct price is even lower ~ equivalent to around $160 per point direct.

This is how I figure out how much to offer on resale and how to normalize the per point rate between contracts. Usually paying a little more for a fully loaded contract is a much better deal than buying the rock bottom stripped contract.

 

[Sandisw]

Dues are billed on calendar year and it’s for operation of the resort that year. Because banking and borrowing exist, everyone who uses points…really doesn’t matter which ones…during that year of ownership pay for its operational costs.

When you buy direct, they don’t bill you based on points you get and UY…but on day you buy. If I buy today with my June UY, I get 2022 points…still in my 2022 UY…and will only pay 8 months of 2023 dues.

If I bought today and had an April UY, my dues would be exactly the same…but my first set of points would be 2023 because that is the current UY for April.

So, everyone will owe dues until the resort ends….which is January 31st, of whatever year for that resort...SSR is 2054.

How they handle the last month of January dues is unknown. And, we don’t know if they will make any adjustments in those last few years to help owners at an expiring resort use up their points as best they can. Plenty of options they can do, including doing nothing and let It happen the way it happens.

 

[D-Trick]

Part of the joys of having a DEC UY is you get to give your money 11 months in advance to Disney to points you won’t be able to use yet.

I'm jealous of Dec UYs because you can buy a direct contract on Nov 30, immediately call to bank current year points, then only pay 1 month of prorated dues on the current calendar year.

 

[RoseGold]

No one knows. I expect major changes for the 2042 resorts as they approach expiration, otherwise everyone would just borrow and not pay the last year's dues.

 

[RachStu]

I'm jealous of Dec UYs because you can buy a direct contract on Nov 30, immediately call to bank current year points, then only pay 1 month of prorated dues on the current calendar year.

That’s clearly what I should have done last November! Oh well, let’s see what the RIV incentives look like when they are next due to be revised at the end of May. I recall they were particularly good that time last year. Sadly, we didn’t bite the bullet then. I wish we had.

 

[Ruttangel]

I expect if they allow borrowing of 2041 points in 2040 they will make you pay dues for points used. Otherwise people could refuse to pay.

If no borrowing allowed then those Dec UY are going to all be going or renting in Christmas time 2041

As far as the dues for the month of Jan 2042, I would assume DVD makes the dues 13 months in 2041 with the likelihood that there could be large rebates due to owners for reserves not used.

For some resorts that rebate may entice people to buy at replacement resorts at BWV/BCV.

 

[Bmramaut]

I'm jealous of Dec UYs because you can buy a direct contract on Nov 30, immediately call to bank current year points, then only pay 1 month of prorated dues on the current calendar year.

Uh hi this is genius. Have December Use year and looking to add on. Might wait til November now.

 

[CarolMN]

I'm jealous of Dec UYs because you can buy a direct contract on Nov 30, immediately call to bank current year points, then only pay 1 month of prorated dues on the current calendar year.

Uh hi this is genius. Have December Use year and looking to add on. Might wait til November now.

The odds of DVD having current December use year points on November 30 are virtually zero. The points would have been used to rent villas for cash to the general public. DVD doesn't hang on to points hoping for a last minute sale. They can't sell what they don't have.

 

[DebbieB]

The resort would be operating in January of the expiration year, so I would expect one month’s dues.