Mutually cancelable DVC resale purchase contract

[lark]

Once disney exercises ROFR, would the buyer still be legally entitled to cancel?

I would think the effect of exercising ROFR would be to create a new, legally binding contract between Disney and the seller, in which Disney inherits the same terms that the buyer had. The contract may say that the buyer retains the right post-ROFR to cancel, but I think as a matter of law, that provision would become ineffective once the seller receives notice of the exercise of the right from Disney. Or, maybe more accurately, disney would assume that right.

I'm trying to think how this might play out. Let's say disney exercises ROFR. What are you expecting will happen then? You're going to send disney a letter that says, "sorry, the buyer cancelled." I think Disney could simply send you a check and that would be that.

EDIT: Oops -- I think I misunderstood what the thread was about. It's about trying to trick disney into exercising ROFR to get a price that is not available through the market? I got it now. Please resume your regularly scheduled programming. :0)

 

[Dean]

Actually even if you put down $0 the contract is binding, it is just that very few people will enforce the contract in court because of the costs, for me even if I put $0 down I would consider bound to pay the fee (actually perform on the contract unless it was a cancelable one as I described).

Yes I reviewed the “fraud” statues and fraud involves concealment or misrepresentation (in my scenario every party knows that the contract can be cancelled at any time for any reason), which does not exist in this case. As I said earlier if the buyer has the financial ability and any potential thought of buying the contract no mater how remote it is definitely not fraud, even if they did not it most likely would not meet the standard.

And yes no one who had a readily marketable contract would accept no deposit but for those whose contracts for practical purposes are not marketable then what is the risk?

The primary reason (beyond the small chance that in the end they would purchase the contract) is to be an altruistic “white night” to help other member out, that is why the contract would have to be a cancelable with no fee contract (common in the commercial real-estate market for difficult to market properties).

Any agreement that meets the legal requirements that are listed in the timeshare law link that I posted is adequate for DVC to review, although its ability to protect the interest of the 2 principle parties would certainly be an issue, and yes as long as a contract is clear and legible it can be hand written.

Wow if $58 it too much for this contract those with big contracts are at an amazing disadvantage since they just paid $15 to upgrade it making their standard contract equivalent $43 that is 25 % less than any OKW contract has sold for in recent history.

bokwormde

You would be misrepresenting a buyer who intends to not purchase as stated. It's not the ability but the intent that is the operative thought here. Technically a buyer can back out for 10 days, or a year if the 10 days is not disclosed deposit or not.

If you're set on this, why not act as the buyer in a few of these situations, or better yet, just buy them all up. A false buyer is not a white knight, they are a fraud and should be labeled as such. If the buyer is willing to proceed but just as happy to have DVC buy it up, then I am OK with it, if not, IMO it's unethical and likely illegal.

As far the price, yes they likely did throw most if not all of their money away in the extension for such a contract. A single $1000 pt contract at OKW, VB, HH or SSR (or really any resort to a degree) is at a major disadvantage. Not that it is really applicable to this discussion, but do we know this is a distressed situation or that they have not had viable and reasonable offers given the contract specifics and the economy?

The fact that Disney will could use factors such as new vs. existing member attempting to buy the resale contract does not sit well with me in the scheme of ethical.

To my knowledge, they've never used ROFR as a weapon against those looking to buy or who have toured but not bought though they could. Timeshares are inherently illiquid with a built in advantage to the developer or any related seller. It is unreasonable to expect a level playing field as such. DVC and FL law spell this out in the legal documentation.

 

[bookwormde]

Dean,

If you read my wording you will find that nowhere was it stated that the buyer had “no” intention of potentially buying, just that the probability was very low (which I stated several times in our discussion so I am not sure why you keep repeating this). I did state that if someone did have this intent that it still would probably not meet the legal definition of fraud.

You also keep personalizing this (maybe you should sell your DVC, If you are set on this etc), I treat is as an informational exercise that hopefully is interesting and informative to other members. I am not sure what value this adds to the discussion.

I enjoy your counter party perceptions and opinions on the range of issues that you post about, as they are the closest model I have found to what I sense DVC’s position would be on items (well with the exception of room occupancy), and no I do not think you are a “shill” (proper usage) for DVC, just your personally held perceptions and opinions (with no formal direct relationship with DVC).

The funny thing is that I am not sure that DVC would be all the resistant to this. Having lowball prices listed, for the more moderately informed buyers to see, certainly is a negative in terms of the typical purpose of ROFR (to keep prices at a reasonably close level to current retail selling price). I am sure they would not want a “flood” but at a moderate rate to clear some of these low process form public display would make a lot of sense for them, especially since they do not want to have a formal repurchase price. In the case to the OKW point contract even after sales expenses they would be making 80% profit, and on some of the SSR contracts they could make 50%, most businesses would kill for this type of margin. With DVC’s unique ability to “subdivide” the bigger contract from a business sense it has a lot of advantages for DVC.

bookwormde

 

[lark]

If you read my wording you will find that nowhere was it stated that the buyer had “no” intention of potentially buying, just that the probability was very low (which I stated several times in our discussion so I am not sure why you keep repeating this). I did state that if someone did have this intent that it still would probably not meet the legal definition of fraud.

This doesn't make sense to me. Either the buyer is going to buy or he isn't. What conceivable new information would the buyer receive between the time of the contract and the time ROFR passes that might change their mind?

If we're hypothesizing a buyer who truly is in equipoise at the time of execution of the contract, but has a legitimate desire to potentially buy, I would submit there is really no such buyer and so the whole exercise of the original post doesn't really make sense to me. You're postulating a buyer who enters into a contract, and then later decides wholly unrelated to disney's declination of ROFR, not to buy. You could never set this up in advance, because the only way this argument would fly is if there were some changed circumstance for the buyer. And since this thread has merged into legal questions, I don't think there are many courts that would conclude any buyer truly was in equipoise and then simply decided, for reasons entirely unrelated to disney's refusal to exercise ROFR, not to buy -- not unless the buyer took a pay cut or got offered a better dvc contract.

As for whether it's fraud or not, I think it's close. I think it probably is. The thing that makes it close is that that the contract states it may be cancelled after ROFR, which should put disney on notice. However, there is also clearly a material omission here -- no disclosure of the buyer's true intentions by the seller. That said, I can't conceive of any damages, and I don't think disney would ever pursue it. But who knows?

I think disney could credibly argue that their decision whether or not to exercise ROFR has two components: (1) the price, and (2) whether they wish to control the supply of inventory available to resale buyers. On the second issue, I think a credible argument can be made that they were tricked into exercising ROFR.

 

[marynvince]

This whole discussion revolves around determining what Disney will pay for a contract, given the variables of location and number of points, and when that decision takes place.

Since they won't tell us, the OP posits that as owners we send through "contracts" that they buy, or not. This will quickly identify the true value of a contract and if the property is really available to a potential buyer.

I think a credible argument can be made that they were tricked into exercising ROFR. There's no tricking going on. If they buy, it's at their price.

Here's the rub. If I find a resale contract that is the right price for me and I make an offer, I may not get it. Disney may buy. If they are going to buy, why not buy at the beginning of the process instead of waiting for me to say I want it. This mutually cancellable contract notion levels the playing field.

 

[lark]

If they are going to buy, why not buy at the beginning of the process instead of waiting for me to say I want it. This mutually cancellable contract notion levels the playing field.

You've answered your own question. Disney almost certainly DOES care that there exists a willing buyer. The question is not solely one of price.

If disney did not care, they would simply field offers from owners who want to sell. In other words, if you were to call up disney and say, "will you buy my points back for $80 per point," they might very well say no. But that doesn't mean they will decline ROFR if you present them with a legitimate contract to sell the very same points at $80/point.

The existence of a willing buyer is exactly what changes, and exactly why disney may elect to exercise ROFR. Disney is in the business of selling points, so when someone puts theirs on the resale market, they become disney's competitor. ROFR exists precisely to allow disney to keep the price of its own product high and to preserve its own value. So, it will pay a premium at times to ROFR, depending on its inventory and strategy, both to get the points back AND to stimulate demand.

 

[BWV Dreamin]

. On the second issue, I think a credible argument can be made that they were tricked into exercising ROFR.

Why would Disney care? There are a couple of reasons (lack of funds, just plain backing out) why a buyer would not complete the sale, despite passing ROFR. I don't see any difference in the outcome of the "mutual cancellabe" option vs. the other two examples stated. The sale is never completed. Commission is still due.

 

[lark]

Here's a very simple way to think about the question: Is there a reason you do not want to include the bit of information you're omitting? If the answer is yes, it's almost certainly material and it's almost certainly trickery.

If all disney cares about is price, why are we even having this thread? There's a simple solution. Simply put in the contract the following language: "Buyer retains the right to cancel if DVC does not exercise ROFR. Buyer has little, if any, intention of actually completing this transaction if that happens. Theoretically, buyer might. But mostly, this contract just exists to see whether DVC will exercise ROFR at the contract price."

But that's exactly what people want to omit. Why? Precisely because disney *might* care. That makes it a material omission, by definition. If you really don't believe disney would care, then just write a contract with that language in it. I don't think that was what the OP was proposing. And I think everyone on the board knows disney really does care whether there truly is a willing buyer. Isn't that the whole point of the question?

 

[crisi]

Why would Disney care? There are a couple of reasons (lack of funds, just plain backing out) why a buyer would not complete the sale, despite passing ROFR. I don't see any difference in the outcome of the "mutual cancellabe" option vs. the other two examples stated. The sale is never completed. Commission is still due.

Because Disney doesn't want to spend money they don't need to spend at this moment in time any more than anyone else does. They don't want excess DVC inventory on their books if they don't need to carry it.

Most big companies I've worked for pay on "net 60" terms. Most companies prefer to be paid net 30, but holding onto that money for an extra month is a big deal. Even when its office supplies. Disney isn't going to have a different opinion on TVM just because a timeshare is involved. Nor are they going to want to pay more for a contract than they need to - especially in tight times.

 

[BWV Dreamin]

Because Disney doesn't want to spend money they don't need to spend at this moment in time any more than anyone else does. They don't want excess DVC inventory on their books if they don't need to carry it.
.

Well we don't really know that to be the case. If so, why would Disney buy back any contracts?

 

[crisi]

Well we don't really know that to be the case. If so, why would Disney buy back any contracts?

Of course we know that is the case, or Disney is run unlike any other corporation in existence. No company wants to pay for something today they can pay for tomorrow at the same price. No company wants to have excess inventory, particularly inventory purchased for more than they might have gotten it for tomorrow.

 

[pirateparrot]

Precisely because disney *might* care. That makes it a material omission, by definition. If you really don't believe disney would care, then just write a contract with that language in it. I don't think that was what the OP was proposing. And I think everyone on the board knows disney really does care whether there truly is a willing buyer. Isn't that the whole point of the question?

Not a lawyer but is it a material omission in the contract is between party A and party B? Is Disney technically a party to that contract or just a party to a previous contract with party A? Party B has no contract with Disney until Disney passes ROFR. Just wondering...

 

[RobDoc]

Not a lawyer but is it a material omission in the contract is between party A and party B? Is Disney technically a party to that contract or just a party to a previous contract with party A? Party B has no contract with Disney until Disney passes ROFR. Just wondering...

Party B (buyer) has no contract with Disney until they become members by purchasing the contract. Party A (seller) does have a contract with Disney that any resale is subject to ROFR. If DVC accepts the terms of the accepted contract, the seller is bound by that acceptance and the subsequent ROFR. If Disney passes on ROFR, the sale is between the parties and will proceed from there.

The part of this hypothetical unclear to me is whether a broker would really agree to such an offer and, if so, why would they - unless there is some clause allowing for a commission in the event the parties invoke the cancellation clause.

If the broker has invested time, effort and possibly marketing expense to find a buyer, why would they then agree to forego a commission?

I would have no problem with such a clause if the seller has found his own buyer but don't see any benefit to the broker to agree to sell a contract without an agreement to receive a commission.

 

[Dean]

Dean,

If you read my wording you will find that nowhere was it stated that the buyer had “no” intention of potentially buying, just that the probability was very low (which I stated several times in our discussion so I am not sure why you keep repeating this). I did state that if someone did have this intent that it still would probably not meet the legal definition of fraud.

You also keep personalizing this (maybe you should sell your DVC, If you are set on this etc), I treat is as an informational exercise that hopefully is interesting and informative to other members. I am not sure what value this adds to the discussion.

I enjoy your counter party perceptions and opinions on the range of issues that you post about, as they are the closest model I have found to what I sense DVC’s position would be on items (well with the exception of room occupancy), and no I do not think you are a “shill” (proper usage) for DVC, just your personally held perceptions and opinions (with no formal direct relationship with DVC).

The funny thing is that I am not sure that DVC would be all the resistant to this. Having lowball prices listed, for the more moderately informed buyers to see, certainly is a negative in terms of the typical purpose of ROFR (to keep prices at a reasonably close level to current retail selling price). I am sure they would not want a “flood” but at a moderate rate to clear some of these low process form public display would make a lot of sense for them, especially since they do not want to have a formal repurchase price. In the case to the OKW point contract even after sales expenses they would be making 80% profit, and on some of the SSR contracts they could make 50%, most businesses would kill for this type of margin. With DVC’s unique ability to “subdivide” the bigger contract from a business sense it has a lot of advantages for DVC.

bookwormde

One is either a buyer or not, there is no in between. Of course one could get cold feet later or their situation could change. IMO, you've skirted around the issue hinting heavily at having someone posing as a buyer for the intent of activating ROFR. Did I read your intent incorrectly. The attempt at enacting minor technicalities doesn't change that, IMO. The other issue that comes up is that I know of at least one instance where one of the resale companies invited someone to remove their listing from their system because it was listed too low. It seems they didn't want others to see those prices and feel that was a normal price.

As for selling, I will eventually sell my BWV contract in all likelihood and possibly at least part of my AKV contracts as well. Heck, I have toyed with the idea of selling all but a 25 point contract and keep that for the perks alone. If I didn't expect that someday they'll change the fee structure to a base amount plus so much a point in addition, I likely would have already.

This whole discussion revolves around determining what Disney will pay for a contract, given the variables of location and number of points, and when that decision takes place.

Since they won't tell us, the OP posits that as owners we send through "contracts" that they buy, or not. This will quickly identify the true value of a contract and if the property is really available to a potential buyer.

I think a credible argument can be made that they were tricked into exercising ROFR. There's no tricking going on. If they buy, it's at their price.

Here's the rub. If I find a resale contract that is the right price for me and I make an offer, I may not get it. Disney may buy. If they are going to buy, why not buy at the beginning of the process instead of waiting for me to say I want it. This mutually cancellable contract notion levels the playing field.

They won't and given there really hasn't been a set price in the past, I doubt it'd make much difference. I've seen one contract get bought ROFR and a week or 2 later an almost identical but better one go through. A large part of the purpose IS to keep you guessing. There is no need to "level the playing field", it is not supposed to be level in this situation. If one doesn't want to be in that situation, simply don't buy into DVC, it really is that simple and no amount of rationalizing behavior that is unethical and likely illegal will change that nor does the end justify the means.

Well we don't really know that to be the case. If so, why would Disney buy back any contracts?

About 80% of ROFR is simply to generate uncertainty and create the illusion that the price difference isn't that much between retail and resale and to create the idea that it's not worth buying resale due to the uncertainty and risk of ROFR. That they MIGHT make a few $$$ on a given resale is a minor point and the truth is they likely make little if any on ROFR directly, where they make their money is on the increased retail sales.

As for DVD caring, it would depend on specifics I suppose. If the price is low enough, they might be very happy to get something at half the going rate or less, even if they have to sit on the inventory a while. My guess is (and it's only a guess) they'd likely let the 1000 pt contract in question go through at almost any price of $40 or more pp. That's especially true if there is any financial issues with the seller such as being behind on dues in any way. The one advantage DVC has, and it's a big one, is they can split it up but no one else can.

 

[BWV Dreamin]

The timeshare brokers that I have worked with all expect commission to be paid when a buyer is "found", or rather executes the contract, regardless if the contract goes to Disney, settlement, or not. There's no monetary reason not to entertain a mutual cancellable contract.

Party B (buyer) has no contract with Disney until they become members by purchasing the contract. Party A (seller) does have a contract with Disney that any resale is subject to ROFR. If DVC accepts the terms of the accepted contract, the seller is bound by that acceptance and the subsequent ROFR. If Disney passes on ROFR, the sale is between the parties and will proceed from there.

The part of this hypothetical unclear to me is whether a broker would really agree to such an offer and, if so, why would they - unless there is some clause allowing for a commission in the event the parties invoke the cancellation clause.

If the broker has invested time, effort and possibly marketing expense to find a buyer, why would they then agree to forego a commission?

I would have no problem with such a clause if the seller has found his own buyer but don't see any benefit to the broker to agree to sell a contract without an agreement to receive a commission.

 

[RobDoc]

The timeshare brokers that I have worked with all expect commission to be paid when a buyer is "found", or rather executes the contract, regardless if the contract goes to Disney, settlement, or not. There's no monetary reason not to entertain a mutual cancellable contract.

I agree that the broker would be due a commission.

My point is that I didn't see any mention of how the broker would be paid in this hypothetical. I would expect that if the seller initiated the cancellation when ROFR was waived he would be responsible for the commission and if the buyer cancelled he would be responsible - but that doesn't seem to be included in the hypothetical contract.

 

[marynvince]

They won't and given there really hasn't been a set price in the past, I doubt it'd make much difference. I've seen one contract get bought ROFR and a week or 2 later an almost identical but better one go through. A large part of the purpose IS to keep you guessing. There is no need to "level the playing field", it is not supposed to be level in this situation. If one doesn't want to be in that situation, simply don't buy into DVC, it really is that simple and no amount of rationalizing behavior that is unethical and likely illegal will change that nor does the end justify the means.

Good thing our forefathers didn't feel that way. It's OK to have an open mind and to consider other points of view as valid especially when double standards are involved. Just because Disney has written into their contract that they have ROFR doesnt mean it's in the best interest of the DVC owners. The point shuffle was "rationalized" as being in the best interest of DVC to maximze bookings. Well, I rationalize that an owner selling DVC in a free marketplace is also in the best interest of DVC. When Disney exercises ROFR that is not going to maximize bookings. They've just eliminated a potentail owner.

I'm a happy owner and am thinking of adding on, not selling. I just shake my head when i see so many opinions expressed that are not open to change or the consideration of alternative methodology to bring about equality in the marketplace. I don't know that equality should ever be construed as illegal or unethical.

 

[lark]

Just because Disney has written into their contract that they have ROFR doesnt mean it's in the best interest of the DVC owners.

For what it's worth, ROFR is of tremendous value to owners. Without it, the resale value of our points would plumet.

Disney does it for selfish reasons -- they want to keep a robust market for their own points inventory. But the benefit to owners is also very significant. If you have any doubt, look at what has happened to marriott timeshares in the down economy since marriott stopped exericising ROFR.

The people who are harmed by ROFR are potential buyers.

 

[marynvince]

For what it's worth, ROFR is of tremendous value to owners. Without it, the resale value of our points would plumet.

Disney does it for selfish reasons -- they want to keep a robust market for their own points inventory. But the benefit to owners is also very significant. If you have any doubt, look at what has happened to marriott timeshares in the down economy since marriott stopped exericising ROFR.

The people who are harmed by ROFR are potential buyers.

So that potential buyers, like me, dont find a contract that is a good value to them, only to have it snapped up by ROFR.

 

[lark]

So that potential buyers, like me, dont find a contract that is a good value to them, only to have it snapped up by ROFR.

Yes. ROFR increases the cost of timeshares above what they would be if there were no ROFR.

In the long run, this is good. If you have any doubt, look at the world of timesharing separate from DVC. Companies sell their inventory, resales drop to 1/3 or 1/4 of the developer market. The selling company is left with little incentive, and so maintenance fees steadily increase, until buyers are eventually holding a property where they can't even rent the unit for the cost of the maintenance fees, and the property goes into slow decline anyway.

If it weren't for ROFR and the fact that disney continues to build timeshares at places like BLT and hawaii and VGC, the value of points would steadily decline, and eventually would become just another timeshare. No more renting points for $10/point. You'd be lucky to recapture dues with rentals.

So, the bottom line is that without ROFR, sure, you would probably be eventually able to find OKW points for $30 out there. But the product you would end up buying would not be anything like the product that exists currently. It would be just another timeshare.

If you're serious about wanting to own DVC and planning on holding it for at least 10 years, ROFR is a very good thing. You may have to pay more at the outset, but you get much more over time and if you ever need to resell.