Does Disney pay the Maintenance Fees on The Points They Own?

[Dean]

I was rereading through the recent paperwork I received and the next to the last paragraph caught my eye. I'll quote part of the paragraph 5 under Estimated Capital Reserves Budget (last page).

In consideration of this Guarantee and pursuant to Florida Law, DVD will be excused from the payment of it's share of the Common Expenses which otherwise would have been assessed against it's unsold Ownership Interests during the term of the Guarantee.

 

[BobBrazeal]

What "Guarantee" do they make in the preceding paragraphs? Sorry, my paperwork is packed away right now or I'd look for myself.

 

[Dean]

The Guarantee says

DVD has agreed to guarantee each owner that they will only be required to pay an assessment for reserves expenses of $0.3884 per Vacation Point through December 31, 2002, exclussive of ad valorem taxes which are billed separately. ...DVD will pay any differences between actual expenses and assessments collected from all owners and income from other sources.

My initial reading is that if the expenses are higher for the year than anticipated, DVD will pay the extra with no special assessments. It should also mean no carryover expenses but I doubt that's true in reality. To me this means that as long as there are no unexpected major extra costs and the bean counters have done their job appropriately, DVD has no costs on the roughly 4% of the points they own at OKW. I assume there are similar documents for the other resorts.

Now that's not necessarily bad. If the extra points are used as a cushion to make sure everyone has a room, account for out of service units and prevent overselling; that's ok. Even if they rent the rooms at last minute after assuring all else is taken care of, I'm still cool. Obviously using those points to reserve Xmas and spring break 11 months (before you or I could reserve), that's a different story.

 

[drusba]

The clause you mention is inserted as to both operating expenses and capital reserves. It has been around for the resorts since the beginning. If you check your notices of the annual meeting for each year, you will see that one of the items on the agenda annually has been to pass this guarantee and exemption from dues for each upcoming year.

This exemption from dues is addressed and allowed under Florida timeshare laws. It applies to "unsold" interests which includes any interests in any units dedicated to DVC and not yet sold and the 4% of each unit dedicated to DVC that DVD retains that is never sold. It does not apply to interests purchased by DVD in the resale market under its right of first refusal.

Whether you can consider it a developer "perc" is probably subject to debate. If costs for the year exceed the amount budgeted, DVD makes up the difference. Moreover, even if costs equal the budget, but collections of dues are below budget, e.g., because of members who default, DVD makes up the difference. Thus it "guarantees" that there will be no additional assessments to members during any given year as a result of any shortfall.

 

[ralphd]

Think Dean's last post has the most merit. DVD will probably leave the time in the pool until a time line has been crossed each year. The time will then be given to CRO for cash reservations.
Remember that maintenance (such as painting and etc.) must be performed during this time.
ralphd

 

[mikek]

I think the 4% or so more we wind up paying for dues is a reasonable cost for insurance against crazy assessmnents. I actually prefer it. I like the peace of mind.

 

[xithro]

I just went through the DVC presentation and you have brought up an important issue...All maintenance is performed and paid for by member dues...The 4% is the maximum, additional amount to be added if there is an unexpected repair above and beyond what the regular annual dues would cover, is this correct?

 

[RobDoc]

The 4% is the maximum, additional amount to be added if there is an unexpected repair above and beyond what the regular annual dues would cover, is this correct?

The 4% figure represents the % of each DVC resort held (not sold) by the developer. This number of rooms is used to allow for rooms being refurbished or repaired at the resort. These unsold rooms may be rented by the developer when not needed as "overflow" due to the reasons cited.

The discussion here is all directed to the fact that DVD (the developer) does not pay any annual fee on these rooms, but in doing so- offers some protection to the members in assessments. There still are situations (rare and unusual) when the membership could be assessed other fees beyond annual dues.

 

[drusba]

Xithro, the 4% figure has nothing to do with your amount of dues. In every DVC resort, DVD retains and does not sell 4% of an interest in each unit sold. In other words, point sales to the public account for 96% of the total ownership interests in the resort and DVD retains 4%.

At the end of each year DVD prepares a budget for annual dues for the upcoming year. It has three major components--operating expenses, capital reserves and property taxes. Operating expenses are everything needed to run the resort for the year and perform maintenance and many repairs. Capital reserves are amounts put into a reserve fund to cover anticipated major future expenses, e..g., roofs have to be replaced every 15 to 20 years or so and each year a portion of the amount that will be needed for that is charged for dues that go to capital reserves. Property taxes are the anticipated real estate taxes for the year.

Your annual dues for the upcoming year are based on that budget. The amount you will pay is determined before the beginning of each year. That is a set amount and during the year you will not have to pay any more than that set amount based on the estimated budget. Under the Developer exemption program mentioned above, DVD, the developer, does not pay dues for that 4% interest it retains, but if the amount it collects in dues from members is not enough to cover actual expenses for the year, DVD, not the members, makes up the difference. In other words, in your example, DVD, not the members makes up the difference

Your dues can increase evey year although the maximum annual increase is 15% (excluding property taxes which can be raised any amount according to the amount actually charged for property taxes).

Reality has been that dues have generally gone up a little each year (average about 2% to 3% per year) although some years it has been more and others there have actually been decreases.

 

[xithro]

Thanks guys!!! I appreciate your responses...I recieved the information a few days ago and haven't had the opportunity to look over the paperwork in detail...