DVC 2012 Dues

[DebbieB]

Aulani first went on sale back in July, 2010. The mistake of dues being set too low was discovered in July, 2011 (or at least made public), and the subsequent announcement to increase dues and get Aulani "back in the black" was made back in September, 2011. Yes, this increase was 33%, and yes, this did occur over a one year time period (14 months to be exact). Here's a link to the article:

http://www.orlandosentinel.com/the-daily-disney/os-disney-aulani-maintenance-fee-20110922,0,7012355.story

The people who bought before the state stopped sales do not have to pay the increase, they are subsidized for the difference for the life of their contract. So they did not pay the 33% increase. People who bought after had the choice to walk away or pay the "revised" 2011 figure.

 

[Andrew015]

The people who bought before the state stopped sales do not have to pay the increase, they are subsidized for the difference for the life of their contract. So they did not pay the 33% increase. People who bought after had the choice to walk away or pay the "revised" 2011 figure.

Debbie,

That is correct. But where you are losing me is by trying to compare what happened at Aulani (33% increase, blatant breach of contract, and thus "illegal") to the recent 8% increase at AKL / BLT (in-line with our contracts, and thus, not illegal), which are two totally different things.

The reason that Aulani buyers who bought in prior to the 33% increase are subsidized, and those who bought in afterwards had the option to walk away, is because the increase breached the terms of purchase (i.e. increases not being able to jump by more than 15% in one year).

All I am trying to say is that the 8% increase at AKL and BLT is in line with our contracts, and it in no way, shape, or form breaches our agreement that we have with DVC. Therefore, it cannot be considered to be illegal, and no one should expect "legal action" to be taken. Disney will not be subsidizing contracts or giving anyone the option to walk away from something that we are legally bound to abide by.

Where I think we can agree is that the tactic of marketing "cheap dues" to lure in unsuspecting buyers, and once they're locked in and the property is almost sold out, sending dues through the roof.... is pretty darn crappy.

But as Jim and Bill already mentioned, this is the nature of the business. Buyers should have done their due dilligence to see this is a pattern that should have been expected, based on similar historical increases at other resorts. In its simplest form, this is a "good business" move for Disney, but stinks for the customer.

Unfortunately, the majority of DVC owners and perspective buyers are un-informed. They're blinded by the "pixie dust", or simply don't care enough to understand how much their dues increased or why. If that wasn't the case, Disney would have to think long and hard about making such a move, in fear that perspective customers would turn and run, or current customers would sell like crazy. But they don't have to. Most buyers don't frequent sites like this, and make emotional purchase decisions rather than informed ones, and for the current owners.... what else can we do other than pay up? Sell cheap, so Disney can buy back our contracts, and resell to more, uninformed, Pixie Dust-impaired buyers?

Seems like they have it all worked out....

 

[DebbieB]

Debbie,

That is correct. But where you are losing me is by trying to compare what happened at Aulani to the recent 8% increase at AKL / BLT, which are two totally different things.

The reason that Aulani buyers who bought in prior to the 33% increase are subsidized, and those who bought in afterwards had the option to walk away, is because the increase breached the terms of purchase (i.e. increases not being able to jump by more than 15% in one year).

All I am trying to say is that the 8% increase at AKL and BLT is in line with our contracts, and it in no way, shape, or form breaches our agreement that we have with DVC. Therefore, it cannot be considered to be illegal, and no one should expect "legal action" to be taken. Disney will not be subsidizing contracts or giving anyone the option to walk away from something that we are legally bound to abide by.

Where I think we can agree is that the tactic of marketing "cheap dues" to lure in unsuspecting buyers, and once they're locked in and the property is almost sold out, sending dues through the roof.... is pretty darn crappy.

But as Jim and Bill already mentioned, this is the nature of the business. Buyers should have done their due dilligence to see this is a pattern that should have been expected, based on similar historical increases at other resorts. In its simplest form, this is a "good business" move for Disney.

Unfortunately, the majority of DVC owners and perspective buyers are un-informed. They're blinded by the "pixie dust", or simply don't care enough to understand how much their dues increased or why. If that wasn't the case, Disney would have to think long and hard about making such a move, but they don't have to.

DVC did not plan to increase dues 33% at one time, there was no attempt to breach the contract. When the state was reviewing their paperwork for licensing, they picked up on the fact that the figures were very low. Which would end up causing large increases in future years. They could not have hit owners 33% in one year because it would have breached the contract as you said. So what would have happened is owners would have been hit with large increases each year (within the 15% allowed), which the state thought was deceptive to purchasers. Did the same thing happen at AKV or BLT? Who knows.

 

[twinklebug]

My increase with my one standard sized contract will be less than $50 for the year. Pennies considered the cost of an actual trip to WDW. Miniscule compared to maintaining a home. Most owners are in the same boat: they'll see the increase, give a knee jerk "What?" reaction and just pay it. The loudest complaints come from those with large contracts. DVC knows this, and knows that at the yearly meeting only a very small percentage of those folk will turn up -- easy to quiet down. Increases will always be approved because they are 'needed'. The real question, given that this is a huge company we're dealing with, is: are the increases justified, or is there some underhand accounting going on here to line the pocketbooks of the executives? Claire, being new to this position, I'm sure is pulling the reigns tight and making sure the dues are justified but properly reflect operating costs with the ability to have decent reserves.

Before we can discuss much further we need to see the numbers to understand how DVC's determined the increase costs. I'm a pessimistic, optimistic analyst. I want believe what I'm told - but NEED to see proof to back it up. How much time does Disney give us to review numbers before the meeting? Is there a person available to answer questions before the meeting? I'm doubting this. I'm just a minnow in the pond, they don't feel a need to answer to me. You can bet though that if their largest point holder has questions (Disney) they'll answer.

Offshoot question: I assume Disney pays the same dues/point on the contracts that it owns as the rest of us do, but do we know this as a fact? There's probably a law stating they have to, but I don't know real estate law very well.

 

[Andrew015]

Did the same thing happen at AKV or BLT? Who knows.

Possible, but doubtful. I believe that Aulani was an honest mistake, and once discovered (Timeshare laws aside), Disney would have done the right thing regardless.

Before we can discuss much further we need to see the numbers to understand how DVC's determined the increase costs. I'm a pessimistic, optimistic analyst. I want believe what I'm told - but I NEED to see proof to back it up.

Seeing the statements would be most beneficial, but I think it's safe to say that Disney wouldn't make the same major blunder twice. I think this will just prove to be Disney doing what they do best... extracting the most $$$ possible from their guests and making them like it, begging to come back for more.

Speaking of which, has anyone seen any small BWV resales pop up as of late?

 

[tjkraz]

IMO the BLT low dues were only used as a sales tool. "Buy BLT, you have the monorail, you are close to the Magic Kingdom, and it has the lowest dues of any DVC resort".

Now that they are almost sold out, they don't need the tool and the dues are going up.

I don't think that the dues increase will hurt sales one bit. Most buyers have no idea what the dues were or what they could be. Most don't read their contracts and if they do, don't really understand the true impact on their membership.

You are contradicting yourself, Bill.

Personally I do think buyers give some consideration to dues and yes, the low BLT dues are a nice selling point. But I don't see why Disney would bother keeping them artificially low when they were so far under other resorts.

In 2009, BLT started at $3.67. Next closest were OKW at $4.73 and SSR at $4.34. Anything under $4.00 per point is still an excellent selling point when compared to the others.

Disney could have easily gone up $.10 - $.20 per point and it wouldn't have impacted sales one bit.

BTW, regarding your questions on the SSR Paddock pool, DVC was straightforward in stating that members would be paying for it. The dues statement which revealed the expansion plans specifically stated that funds were coming from capital reserves.

 

[DVC Dude]

This thread is SPECULATION based upon an Internet rumor and the primary source has not been revealed.

I logged into the DVC member website and NOTHING is there regarding 2012 dues.

Thus, unless someone PROVES that these numbers are the Real Thing, then I am not going to get too upset.

However, the 8.5% increase for BLT seems outta whack and I hope it gets corrected soon.

 

[DebbieB]

This thread is SPECULATION based upon an Internet rumor and the primary source has not been revealed.

I logged into the DVC member website and NOTHING is there regarding 2012 dues.

Thus, unless someone PROVES that these numbers are the Real Thing, then I am not going to get too upset.

However, the 8.5% increase for BLT seems outta whack and I hope it gets corrected soon.

The budget announcements usually come out Thanksgiving week, so they should be in the mail. They are not posted on the member website until after approved at the annual meeting.

The sources I've seen quoted as confirming are The Timeshare Store & (name deleted by filter). Should be reliable.

 

[twinklebug]

The budget announcements usually come out Thanksgiving week, so they should be in the mail. They are not posted on the member website until after approved at the annual meeting.

The sources I've seen quoted as confirming are The Timeshare Store & (name deleted by filter). Should be reliable.

Thank you - that answers one of my questions.

 

[disneynutz]

You are contradicting yourself, Bill.

Personally I do think buyers give some consideration to dues and yes, the low BLT dues are a nice selling point. But I don't see why Disney would bother keeping them artificially low when they were so far under other resorts.

In 2009, BLT started at $3.67. Next closest were OKW at $4.73 and SSR at $4.34. Anything under $4.00 per point is still an excellent selling point when compared to the others.

Disney could have easily gone up $.10 - $.20 per point and it wouldn't have impacted sales one bit.

BTW, regarding your questions on the SSR Paddock pool, DVC was straightforward in stating that members would be paying for it. The dues statement which revealed the expansion plans specifically stated that funds were coming from capital reserves.

My point is that most buyers don't pay attention to the dues, BUT I am sure that they were told buy their Guides that BLT has the cheapest dues as a sales tool. I know that we were.

We aren't SSR owners so we never saw the dues statement. Weren't there several threads where members were told that Disney was paying for the Paddock pool?

Bill

 

[JimMIA]

They did not increase dues 33% in one year. 2011 was the first year. The State of Hawaii realized the initial dues were too low and forced them to recalculate.

More importantly, no OWNER's dues were raised. Sales were stopped (by the State of Hawaii) when the matter came to light and DVD agreed to subsidize the existing owners' dues for the duration of the contract.

 

[ArtieMcD]

Maybe some more Jim Lewis "creative accounting" was discovered. All opened under his lead.

This is exactly what I think is going to happen... Remeber in 2011, the Operating costs of our dues increased by 14% in some cases (especially AKV and BLT)... This can be easily verified by looking at your 2010 and 11 dues statements. But DVC bragged about holding dues increases at 3% ish at last years member meeting. However if you looked closely at the numbers, it was nothing more than an accounting trick as the "reserve" portion of our dues dropped so that holding the line on the 3% increase can be achieved. I'm betting we will see the reserve portion on this years budget creep back to regular amounts finally realizing the cost increases we all we subject to in 2011....

I would not at all be surprised to hear the new management at the members meeting pass this blame for this on the decisions to artificially lower reserve amounts last year on the now-ex DVC leaders.

 

[DebbieB]

This is exactly what I think is going to happen... Remeber in 2011, the Operating costs of our dues increased by 14% in some cases (especially AKV and BLT)... This can be easily verified by looking at your 2010 and 11 dues statements. But DVC bragged about holding dues increases at 3% ish at last years member meeting. However if you looked closely at the numbers, it was nothing more than an accounting trick as the "reserve" portion of our dues dropped so that holding the line on the 3% increase can be achieved. I'm betting we will see the reserve portion on this years budget creep back to regular amounts finally realizing the cost increases we all we subject to in 2011....

I would not at all be surprised to hear the new management at the members meeting pass this blame for this on the decisions to artificially lower reserve amounts last year on the now-ex DVC leaders.

They will not blame the ex-DVC leaders because then people will be screaming for a subsidy like Aulani.

 

[KingRichard]

If those new dues are correct then while BLT will increase by 33 cents it is a large percentage because it was also the lowest cost before the increase.

If you look at the last 3-4 years worth the increases then it is not that much more then the other resorts on a percentage increase.

The older resorts had much more time to build reserves to pay for damages and replacement furniture and upgrades while BLT has the shortest time/reserves.

Hopefully the next few years it will average out and stay rather low.

It is and will be still the lowest?

 

[Sammie]

We got ours today, the dues are correct.

 

[newyorkmike]

I am just catching up on this thread and the discussion of potential claims against DVD for "fraud" in connection with artificially low dues at the outset of BLT or AKV.

I am a securities lawyer by trade and I practice in New York, so my experience is limited to federal securities laws and New York State securities laws principally under the Martin Act. Timeshare, co-op and condo offerings are generally governed by the applicable timeshare, co-op or condo statutes, but certain types of offerings are also subject to regulation as securities offerings under the Martin Act primarily with respect to the antifraud rules. I don't know Florida law, and I know for a fact that are several key differences between Florida and New York or federal securities laws, so please don't construe anything I write as definitive legal advice.

Having said that, the antifraud rules are substantially similar in most states. The general standard of liability is that an offering prospectus, be it for securities or real estate interests, cannot include a material misstatement or omit to state a material fact. In certain cases, a material misstatement or omission is not enough, but rather it must be made with intent to defraud (this is the standard that varies widely from state to state). The standard for determining whether information is material is whether the average purchaser or investor would consider the information to so alter the total mix of information as to be relevant and important in making a purchasing or investment decision.

It is true that the offering prospectus for various DVC properties includes provisions for annual increases in MFs up to 15% each year. At least the AKV offering prospectus that I read (and just double checked), there is no disclosure of any known events or circumstances that would require an increase in MFs at any time.

In my opinion, IF it could be proven that (1) sales were completed at a time when MFs were arbitrarily and intentionally low, and (2) DVD knew that they were low or intentionally priced them low with the understanding that significant increases in MFs were imminently necessary, I think you could make a case that such information is material to purchasers and that the failure to provide disclosure of the potential or known inadequacy of the MFs at the time of sale of the units was a material misstatement or omission and therefore a violation of the antifraud rules (Again, this assumes that the Florida antifraud rules are substantially the same as those rules in most jurisdictions - which is NOT an absolute). In other words, if they knew these big increases were imminent and didn't disclose it, the offering prospectus would be deficient. The available remedies could be anything from subsidized MFs for affected purchasers (most likely) to a right of rescission for anyone who purchased.

I find it very difficult that such a scheme or plan would have been sustainable given the various third party audits that occur with respect to MFs and operating budgets for the DVC properties, but I wouldn't rule it out, and significant jumps in MFs, particularly if they relate to non-extraordinary, ordinary course expenses would certainly give me pause and maybe ask some questions.

 

[JimMIA]

Whether something is fraudulent or not often depends on whether you are talking about criminal fraud or civil fraud.

In Florida, criminal fraud is a specific intent crime which means that you not only have to show something like a material misrepresentation (and/or lots of other things), but also that the misrepresentation was made with the INTENT of defrauding a victim. You have to establish "probable cause" of criminal intent to file a case and you have to prove criminal intent beyond a reasonable doubt to get a conviction.

With civil fraud, the elements of fraud are essentially the same but the burden of proof is much less -- so what would pass for fraud in the civil/regulatory arena may be much less than what would bring criminal charges.

My gut tells me they intentionally set the dues low with Aulani and got caught by the State of Hawaii. But even if they did, the devil is in the details in these cases and whether or not there was any fraud involved would depend on those details. There are many other issues that could have caused the stoppage of sales besides fraud, but the fact that the "fix" was subsidizing dues for the life of a lot of contracts makes me think the dues issue was the main problem.

DVD, of course, will insist that any mistakes were inadvertent, which brings me to my favorite fraud cliche:

"Fraud looks a lot like stupid."

 

[DVC SSR Owner]

I noticed that they gave themselves a pretty good raise on their "management fee". In this economy with flat or no raises, can this raise really be justified? I think not!

 

[tjkraz]

I noticed that they gave themselves a pretty good raise on their "management fee". In this economy with flat or no raises, can this raise really be justified? I think not!

The management fee is a fixed percentage of most other budget items. Always has been.

 

[DVC SSR Owner]

The management fee is a fixed percentage of most other budget items. Always has been.

So they have more incentive to raise the mf then?