Some Comments (Long) on the Possible
DVC Trust:
A. Known Information
What we know so far is merely that DVC has asked in a survey for members’ thoughts on possibly being able to purchase interests in a trust that will allow purchasers to use the 11-month reservation window at more than one resort. We also have a copy of incomplete new and amended articles of incorporation filed in August 2023 for the not-for-profit corporation named the Palmetto Trust Association, Inc., whose named directors and officers are employed by DVD, which would be the trustee that would legally own the timeshare property interests put into the trust. The trust would have two sets of beneficiaries with beneficiary ownership interests in the trust, Class A for persons who buy into it, and Class B for ownership interests held by DVD. The Articles mention that the purchaser beneficiaries would also receive a deed. Under Florida law, one can create via deed a beneficial ownership interest in the trust, which deed itself does not provide any legal ownership interest in any particular condominium unit owned by a trust. Such trust beneficiary deeds can be filed with other kinds of deeds in Florida.
The Florida statutes seem to require that a multi-site timeshare trust which becomes an owner of actual “accommodations” (a term that includes condominium units) may need to be not-for-profit, see Fl. Stat. §721.53, and, DVD has likely made Palmetto a not-for-profit to be safe (and to assure no tax issues arise with it). The trust would be the one getting the deeded real estate interests in the actual property subject to the trust.
B. Worst Case Scenario
It is unknown whether DVD is contemplating something applicable to only new DVC resorts, all old and new DVC Resorts, or just some of the old resorts to go along with new ones. What I view as the worst case scenario is one where DVD creates this new trust ownership system for all the existing resorts. Assuming it meets legal requirements relating a timeshare trust estate, what would likely happen over time is the ability of existing members to get rooms at 11-months out (and also at 7-months out) will become significantly more difficult than already exists.
It is true that the one-to one annual reservation limit must still exist, i.e., DVD cannot create more ownership interests or more points at any given existing DVC resort than the total that could reserve all rooms for one calendar year. Thus, for example, trust beneficiaries would not be able to make more reservations at BWV than allowed by the total already-existing BWV interests put into the trust. Currently, DVD can use interest/points it still owns either via what it says it always keeps (at least 2% of each unit) and the extras it usually has, and even at “sold-out” resorts that could add at least another 2% or more due to unsold points at a resort, ROFR, and foreclosures. It could, in the future, also add a lot more interests to any trust via ROFR’s and foreclosures in existing resorts and via creation of new resorts.
Currently, DVD can make reservations using points it owns and does so, but they are rental reservations done through Disney to non-members. The DVC owner of points differs from the general public who rent through Disney. Among DVC owners is a large group that is always looking and competing for lower point cost rooms, and, particularly over the last 14-years, that group at each resort has grown larger and larger, mainly due to DVD: (a) lowering the total points a new member is required to purchase, which was 160 before 2010, and then as low as 50 to 75 at some resorts for quite a long time, and 100 at others; (b) over the years repeatedly raising the cost per point well beyond any inflation rate increase during a time when most wage increases were stagnant (e.g., the price per point for BWV in early 2010 was $106 and it is now $240), (c) creating new resorts with significantly higher per night point costs for comparable rooms (e.g., VGF, Poly and Riviera) than the ones created before 2010; (d) adding many rooms, such as the bungalows and cabins, with ridiculously high per night point costs, most of which points DVD sold to persons who would buy only enough points for a smaller room, particularly studios, thus resulting in an oversell of studio interests at applicable resorts; and (e) changing studio maximum occupancy at some resorts from 4 (and an infant) to 5 (and an infant), which has particularly had an adverse impact on studio availability at BWV, BCV and BRV.
Thus, in the last 14 years, it has become harder and harder to make reservations, particularly for studios (and lock-off 2BRs). There are now serious problems to reserve a number of rooms at resorts (mostly studios) even at 11-months out, and what is available at any particular resort at 7-months out has shrunken over that period, e.g., 14 years ago, you could easily get anything at SSR well beyond 7-months out but now even SSR rooms can disappear before 7-months out during times in the high demand fall season.
The creation of an all-resorts trust would result in the trust beneficiaries being able to use interests equivalent to hundreds of thousands of points (and later many more) at each existing resort, which in the past were used by DVD only for reservations through Disney central reservations. A whole new large class of DVC owners seeking mainly low cost rooms will be created. That new class will not just be looking, at 11-months out, for the low cost rooms at a single home resort, but instead looking for the low cost rooms at all the lowest cost near park resorts. Likely, over time, BWV, BCV, BRV, CCV and BLT will be the ones that will suffer the highest increase in demand and the largest expansion of the existing 11-month reservation problem.
C.
Legality of Having a Trust.
A trust arrangement, in of itself, is not illegal, as long as legal requirements are met. We do not know enough yet to make conclusions but some issues that may arise include:
(1) Sold Out Resorts Have No Units that Can Be Placed in the Trust.
Having a “Timeshare Estate” is what is needed to use a timeshare in Florida. “Timeshare estate” means “the right to occupy a timeshare unit.” Fl. Sta. §721.05(34). That right can be granted in four alternative ways: (a) a direct fee interest in a timeshare property, (b) partial ownership interest in a condominium unit; (c) partial ownership interest in a cooperative unit; or (d) a beneficial interest in a trust that complies with all aspects of Fl Stat 721.08(2)(c)4 or 721.53(1)e. Id.
Note that the definition of a timeshare estate does not mention that you can have two of those methods applicable to the same timeshare unit. A “timeshare unit” means the actual “accommodation” at a resort that is covered by a timeshare plan. Id. §721.05(1) An “accommodation” is defined as an apartment, condominium, cabin, hotel or motel room. It is not defined to include the partial interest in a room that a purchaser would get, a fact emphasized in the definition of a timeshare unit which provides that 2BR lock-offs cannot be divided into two separate units.
§§721.08(2)(c)4 and 721.53(1)e declare that creation of a timeshare trust requires transfer to the trust of the “accommodation” or “all use rights therein,” i.e., the complete timeshare unit, or
all possible rights to use the unit must be put into the trust, not just partial ownership interests of such units that a timeshare purchaser would purchase. The existing DVC resorts have many timeshare “units” which consist of one or more rooms. They have no units that consist of only part of a room. To create a valid timeshare trust, DVD would need to transfer one or more of those entire units to the trust, but, for sold-out resorts, it does not have the needed 100% ownership in any particular unit because members own about 96% or more of each unit. DVD cannot just transfer its partial ownership interest it retains in the resort units to the trust and create a valid timeshare trust. DVD might be able to set up a trust with newer DVC resorts by putting into it units not yet put into a DVC resort timeshare plan, but it cannot transfer to that trust any unit for which there exists at least one DVC member deeded an interest in the unit.
(2) Palmetto Cannot Be a Timeshare Trust
In its current form, Palmetto cannot be a timeshare trust under Florida law. §§721,08(c)(4) and 721.53(1)e allow a corporation to be a trustee but that trustee corporation must be independent of the developer and any managing agent associated with the developer. The articles of incorporation show that Palmetto is completely controlled by DVD, including because every named director and officer works for it.
(3) Adding a Trust to an Existing DVC Resort Appears Contrary to the POS’s
None of the current DVC POS’s were created with the idea of having a trust for members who could then reserve at any DVC resort at 11-months out. DVD’s plan, if it applies to all resorts, will prejudice existing members by increasing the demand at 11-months for already difficult to get rooms, and it is a problem that will get worse over the years with DVD sending more and more interests acquired ROFR or via foreclosures to the trust. The POSs and statements made during sales presentations clearly led members to believe that a Club Member/Owner who owned part of a unit at one of the DVC resorts would not be competing for reservations at 11-months out with other purchasers who did not purchase a legal interest in a unit in a DVC Resort.
Existing terms of the POS’s of the current resorts (using BWV POS) also appear to reject the concept of allowing a trust. The “Club Member” is defined in many places in the POS as “the owner of record of an Ownership Interest in a DVC Resort. “Ownership Interest” is defined as an “undivided percentage interest in a Unit and the Unit’s undivided interest in the Common Elements and Common Surplus” of the condominium. A “Unit” is defined as a “condominium unit” under the condominium statute, Fl stat §721.05. Nowhere is it mentioned or implied that a Club Member could ever be someone who does not legally own a portion of an actual unit in a DVC resort. It is the Club Member that has the right to make, modify or cancel reservations, and to make reservations at a home resort requires using “home resort” points, which are points that represent the member’s “Ownership Interest in a Unit,” not some ownership interest in a trust.
