Official Thread - New commercial use policy published 03/31

[Sykes]

An important detail for those worried about their genuine personal use being caught up in the commercial use dragnet--the new policy requires that Disney notify you that they believe you are violating the personal use guidelines and gives you an opportunity to remedy the situation before they take any other enforcement actions:

If the Board or Management Company determines that an Owner is engaged in commercial use of their Points in violation of the Governing Documents, the Owner must cease such activity at the demand of the Board or Management Company, and if the Owner does not cease such activity to the satisfaction of the Board or Management Company, the Management Company may elect to take any one or more of the following actions [...]

No one is going to be caught completely by surprise by enforcement action. I would also presume that they'd give you an opportunity to appeal or otherwise explain yourself if you are targeted, but I'll be pretty surprised if they end up targeting anyone that isn't pretty egregious about their commercial use.

 

[AstroBlasters]

…which is great, but I’m not sure it will make it any less likely he ends up in the crosshairs. Maybe? Maybe not.

I don’t think it’s “great”, but I agree that if an enforceable violation is “a pattern of majority of point use by someone not on the deed” then he would definitely show up on the radar if there isn’t a 20 rental threshold.

We shall see….

 

[Moonspinner]

My opinion is they just want everything in a row for litigation. Mega renters are probably going to want compensation for their losses. Disney will be able to direct them to all of the things that were violated.

I agree with this. If you read their wording it is to protect themselves from litigation. In a way, they are going above and beyond with their new statements. They want to appear as fair as possible. They already have the ability to remove owners for commercial activity of any kind. I have a feeling they would reimburse people some baseline value for relinquished contracts.

 

[haletiki]

Man what an absolutely fun and interesting read to catch up on this morning. I saw the news broke of these new guidelines last night but wasn't around to read about them in here until now.

I see this as a giant win for regular DVC members honestly.

 

[Brian Noble]

Another possible explanation

Yet another possible explanation is that more and more owners have learned the ins and outs of the inventory management process. If you can (and based on what you've posted, you have) so can anyone else.

why do you think are they jumping thru all these new hoops, when we all know DVC knows exactly who the commercial renters are

Dotting i's and crossing t's. Disney is a little more sensitive to perception that most, and this gives them something to point to for the rank-and-file owners who have questions. It also helps them in the case that targeted owners push back. "Look, we told you, so you don't get to claim you didn't know."

I see that situation as "for break even" and not for profit.

Interestingly, "makes money" is not a required element of being a commercial enterprise.

 

[Cyberc1978]

I find it pretty silly that someone with only 300 points to rent would be considered a "for profit" business but what do I know.

Wouldn’t a business be something you did full time and not just a few hours every month?

I guess if Disney goes after the large players or point holders that rents then we shall see if something happens.

The large players would be the brokers who flip the contracts and rents all nights in almost every month at Boardwalk and AKV value.

 

[Brian Noble]

Wouldn’t a business be something you did full time and not just a few hours every month?

The IRS certainly does not think so when it comes to my Schedule C.

 

[AstroBlasters]

Yet another possible explanation is that more and more owners have learned the ins and outs of the inventory management process. If you can (and based on what you've posted, you have) so can anyone else.


Dotting i's and crossing t's. Disney is a little more sensitive to perception that most, and this gives them something to point to for the rank-and-file owners who have questions. It also helps them in the case that targeted owners push back. "Look, we told you, so you don't get to claim you didn't know."


Interestingly, "makes money" is not a required element of being a commercial enterprise.

In the past, I believe the DVC board has mentioned on multiple occasions a “is the estimated rental income more than the cost of the dues” test.

 

[Mommb]

I do not like this "rule"...

If we want to travel regularly with another family, why must we be forced to stay in the same room with them? Why can't we book them into their own room? There are many reasons why people who are legitimately travelling together may not want to be in the same room(s). DVC actively promotes the "club" as a way for extended families to vacation together "year after year". What if multiple rooms are needed for those annual vacations? Are they saying that those owners will now be penalized as "commercial renters" if they bring friends or family members "year after year"?

The updated regulations are framed as prohibiting commercial renting -- using your DVC members to make money.

If every year you post on a commercial site that you are planning a large trip and invite people you don't know to pay you for points to be used on that trip, then you may be considered in violation of the policy.

If every year you plan a trip for people you know, which includes using points for multiple rooms, then you are using your membership for personal use. This is exactly what Disney wants you to do. The new policy is not designed to keep people from using their membership for their own vacations, with or without other families.

 

[atthebeachclub]

One thing I thought was very interesting is the prohibition on filming in DVC locations so as to advertise points for sale or rent. I think that could affect DVC sale and rental brokers.
“Without limiting the discretion of the Board and Management Company, the Board and/or Management Company may reasonably conclude that an Owner is using or occupying Vacation Ownership Interests and/or Vacation Homes for commercial purposes based on any one or more of the following activities (which are a non-exhaustive list of examples and without limiting any other possible factors):….

An Owner, Associate, or Owner Agent conducts photography, videotaping, or recording on Resort property that is used to market the availability of Vacation Ownership Interests and/or Vacation Homes for rental activity.”

I wouldn’t want to be in the brokerage business right now as it looks like a tough business moving forward.

 

[DonMacGregor]

He’s kind of stuck. He bought Aulani, Disneyland Hotel, and Rivera direct with loans and then had a job change which cut his income. He can’t sell the contracts without a major cash infusion (which he doesn’t have) and so the rentals essentially cover the dues and part of the loan payments.

We can “should have, could have, would have” all you want…. but that doesn’t really matter at this point.

It’s rent or go into foreclosure and he does not want to go into foreclosure and has hopes that the income will increase in time in a new role with a new company and that he will be able to use them for personal use.

At this point, I would put him in the “willing to risk it” category and will just adjust to have fewer & larger rentals.

Totally appreciate that. Just pointing out that his opinion that "the main impact will be that he will not do small point rentals" probably is far from what could be the "main impact" if he's still habitually renting out all or most of his points. The size of the rentals doesn't matter; it can be the number/percentage of points as well.

Again, I think people are still far too invested in this "20 reservation" idea, when it's literally one of a half dozen (or more per DVC) different criteria DVC can use. It's just the "easiest" to rationalize a perceived work-around for. The idea that renting out the same number/percentage of points but doing it through larger reservations to reduce the number of reservations, isn't going to get you under their radar based on the other criteria they have delineated.

Something else that seems to be going unread or ignored, is the repeated statement that all of these criteria apply to the totality of the ownership interest, across as many contracts as an owner may have control over or access to, so the idea that multiple LLC's, etc. can somehow insulate an owner from any of the defined criteria is wishful thinking.

 

[Brian rhymes with dyin]

One thing I thought was very interesting is the prohibition on filming in DVC locations so as to advertise points for rent. I think that could affect DVC sale and rental brokers.
“Without limiting the discretion of the Board and Management Company, the Board and/or Management Company may reasonably conclude that an Owner is using or occupying Vacation Ownership Interests and/or Vacation Homes for commercial purposes based on any one or more of the following activities (which are a non-exhaustive list of examples and without limiting any other possible factors):….

An Owner, Associate, or Owner Agent conducts photography, videotaping, or recording on Resort property that is used to market the availability of Vacation Ownership Interests and/or Vacation Homes for rental activity.”

I wouldn’t want to be in the brokerage business right now as it looks like a tough business moving forward.

There are a lot of brokers out there which tells you how lucrative it might be to simply be a middleman in a DVC contract negotiation. There's probably some fat to be skimmed off that market.

 

[atthebeachclub]

Totally appreciate that. Just pointing out that his opinion that "the main impact will be that he will not do small point rentals" probably is far from what could be the "main impact" if he's still habitually renting out all or most of his points. The size of the rentals doesn't matter; it can be the number/percentage of points as well.

Again, I think people are still far too invested in this "20 reservation" idea, when it's literally one of a half dozen (or more per DVC) different criteria DVC can use. It's just the "easiest" to rationalize a perceived work-around for. The idea that renting out the same number/percentage of points but doing it through larger reservations to reduce the number of reservations, isn't going to get you under their radar based on the other criteria they have delineated.

Something else that seems to be going unread or ignored, is the repeated statement that all of these criteria apply to the totality of the ownership interest, across as many contracts as an owner may have control over or access to, so the idea that multiple LLC's, etc. can somehow insulate an owner from any of the defined criteria is wishful thinking.

I suspect this friend knows he’s screwed either way and is hoping he may still slide under the radar this way and be less screwed.

 

[Tatebeck]

I do not like this "rule"...

If we want to travel regularly with another family, why must we be forced to stay in the same room with them? Why can't we book them into their own room? There are many reasons why people who are legitimately travelling together may not want to be in the same room(s). DVC actively promotes the "club" as a way for extended families to vacation together "year after year". What if multiple rooms are needed for those annual vacations? Are they saying that those owners will now be penalized as "commercial renters" if they bring friends or family members "year after year"?

It could flag them for review according to the rules as written. But if Disney talks to that owner, when they realize that the member hasn't even rented a single reservation, just used them for their family, I do not think that they would consider that member to be doing anything commercially and thus member would not receive any punishment.

The rule is there so they can do things to members that they find to actually be acting commercially, which I agree with.

 

[atthebeachclub]

There are a lot of brokers out there which tells you how lucrative it might be to simply be a middleman in a DVC contract negotiation. There's probably some fat to be skimmed off that market.

I’ve done the math out of curiosity, and it wouldn’t be where I’d choose to invest my dollars and time.

 

[mkatsy]

I think that the “majority” use rule is incredibly generous of DVC. This product is sold as personal use only, and they will allow a 49% deviation before you are considered to have violated the intended use. On the other hand, the IRS only allows a 10% deviation before intervention. In the case of the personal use of a business property (the literal opposite of our situation) once you use your business property personally for at least 10% of the time you forfeit your business deductions. You are considered to have violated its intended use.

 

[Cyberc1978]

Not in 718.110 back up at the top in 718.103 where they define the terms used in the statutes. Read 718.103 (26) all the way down to 718.103 (29).

Thanks I found it.

It seems I stand corrected and 721 is the one that applies. It looks like 718.110 do apply but in case of conflict between 721 and 718.110 then 721 wins.

 

[DonMacGregor]

It’s been discussed a lot in the past and maybe someone is using a bot - but we honestly don’t know.
We used it as an explanation to why reservations disappear as fast as they do. Another possible explanation could be Disney themselves grapping the rooms - again we don’t know but it is a just as good explanation as any.

You can literally go online right this very second and buy a ticket scalping bot from a dozen or more (probably MANY more) developers. Find the right subreddit and you can probably grab countless free downloads as well. If you can grab a bot built to scrub Taylor Swift or Bad Bunny tickets off major online ticket brokers, then there's zero chance that one can't (or couldn't) have been written or modified to grab DVC reservations.

 

[DanCali]

The way this has played out with Wyndham: They had a short list of who they considered to be the worst offenders, and those specific individuals were very publicly targeted. The first round was a set of "knock it off or else" letters. Those who chose "or else" had their accounts frozen, and were essentially dared to sue. Almost without fail, each of those individuals was so obviously running a business that almost no one else* thought that what they were doing was within The (implied) Rules. Rank and file owners generally lined up with Wyndham and against the Evil Mega-Renters, leaving the latter on an island.

At that point, the Evil Mega-Renters were left with the following choices: exit the business, or try to take Wyndham to court. I can think of exactly one person who negotiated an exit that wasn't a total capitulation, but he did so in part by pointing out all the loopholes that the other Evil Mega-Renters were using to get leverage in the system, so he had something to offer. The rest were stuck in endless and very expensive litigation unitl they either reached a settlment that included an NDA and an agreement to never own Wyndham again, or they just quit.

Will Disney do that? I don't know. But it sure looks like they are lining up the ducks to do exactly this. Slowly.

I am not familiar with Wyndham much but I believe the crackdown started in March 2021, as the pandemic was ending?

It's not like it was a panacea for TNL's (the parent company, that includes multiple businesses) woes... since March 2021 the stock first dropped by 50% and then it took another 2+ years to get back to where it was in 2021. Overall, it's up about 10% in 5 years...

We don't see DVC financials separately, but if an extreme public crackdown drops the company value by 50%, is it a good idea?

 

[DonMacGregor]

I suspect this friend knows he’s screwed either way and is hoping he may still slide under the radar this way and be less screwed.

I actually don't think that that particular person is on anyone's radar, based on the small number of points. My comment was a more generalized response to the somewhat myopic reliance on the "20 reservation rule".