Renting?

[IsDVCForMe?]

Suppose renting out DVC points becomes regulated where owners are prohibited from renting out points. Do the point values decrease or increase? Why?

 

[airjay75]

Others can speak to it better, but I don't believe they could outright prohibit renting - I believe both FL law and the terms of our ownership provide backstops that would make it impossible to completely prohibit renting. There would also be practical issues in enforcing any prohibition, as we face no limitations currently booking rooms for friends or family that are not renting from us.

Now, Disney could take further steps to prohibit what it considers to be commercial renting (which is very vaguely defined in our governing documents). If they did take some significant actions that made the ownership base significantly less comfortable renting their points, I think it would undoubtedly cause resale prices to fall.

Why? You'd increase supply and decrease demand.

On the supply side, there would be both normal, non-commercial DVC owners who have occasionally rented out their points and commercial individuals/entities who would sell. If you were paying attention to the DVC Resale Market, last summer, there was a marked increase in stripped contracts that hit the market after DVC instituted the "personal use" box - this was undoubtedly commercial renters getting nervous about where Disney was headed and offloading some contracts - it appears that was a short lived phenomenon, although that could change if we hear about further actions Disney is taking.

On the demand side, you'd see less demand from those commercial individuals/entities and I think you'd also see less demand from potential non-commercial owners because their ownership would be less flexible. I think a significant selling point of DVC is that it is so easy to rent out your points for those times you aren't planning to use them. Maybe there would be a slight increase in demand from people who had held out buying DVC or who had previously exited because of their frustration with commercial renters and the difficult booking certain rooms. But, I think that would be greatly outweighed by the loss of demand.

 

[intamin]

It's deeded real estate. They can't stop you from renting it out. The above explanation covers most of it. Even for people who are using it commercially, I think they'd have to prove beyond a doubt that it's commercial use to be able to take action but even that is hard to prove. If the owners uses the room twice and rents the rest of his/her points out each year does that count as commercial? They could just not be using the membership as much as they used to.

 

[Brian Noble]

Do the point values decrease or increase?

If Disney was able to significantly curtail rental volumes, resale prices will decrease. It will remove a fair number of buyers from the ecosystem, and those former buyers will be liquidating holdings---in some cases, large holdings.

Disney does not have to prove anything in practice. They have first-mover privilege, and very deep pockets. I believe if they decide to go to the mattresses with an owner (or small group of owners) they will just starve them out. I believe this because it is exactly what Wyndham did, as did one or two other developers.

But, the real lever to lower rental volumes is to collapse demand, not try to curtail supply. And that's a lot easier than a lot of people think---it just depends on whether Disney wants to go there or not.

 

[Dis_Ohana5]

We have 1 resale and 1 direct contract but If we hadn't been able to rent DVC in the past we wouldn't own any contracts right now. Rentals cost DVC nothing and are a nice hook for prospective buyers. I think few people are renting points that haven't been actively researching DVC. If they were to eliminate that somehow going forward resale prices would tank just like they have at every other time share that either doesn't allow it or makes it difficult. When researching DVC we never came across anyone that felt like they were "stuck" in a contract that they regret buying after an aggressive sales person wore them down in a 4 hour hostage situation dressed up as a 1 hour seminar. I would hate to see Disney go there with a product that currently sells itself so well that they keep building new resorts.

 

[Genie+]

To me it seems DVC does not want to wreck the overall rental market. While legally owners have the right to rent, there still are changes DVC could legally make that would impact the ease and profitability. They could implement charges to 7 month trading or things of that nature that could seriously disrupt the market. I just doubt they’d want to upset the existing ecosystem because it holds advantages for both DVC and owners. Instead they try to be more precise in their efforts to reduce the more common egregious practices that negatively impact the membership as a whole.

Don’t throw the baby out with the bathwater, right? So like with confirmed reservations, the worst of which is targeting the majority of BWV resort view and AKV value room availability, they chose to raise the lowest point seasons which reduced profitability. Balancing demand thru the point charts is the best method to prevent confirmed reservations from hoarding certain categories. I think they’ll continue in that direction. Small tweaks that cumulatively push rental behavior back into the more sustainable healthy areas.

 

[AstroBlasters]

Suppose renting out DVC points becomes regulated where owners are prohibited from renting out points. Do the point values decrease or increase? Why?

There are a LOT of previous threads about this topic.

 

[VGCgroupie]

Too exhausted to get into the renting thing again. There are many threads with lots of opinions etc. So although I usually love a hot debate about it. I will just say it could affect value if they stopped renting but honestly I’d rather have a more usable membership than keep my value higher.

 

[Sandisw]

As mentioned, the right to rent can’t be taken away but DVC gets to define what actions by an owners constitue using your membership for a commercial purpose.

So, it comes down to number of reservations you have one your membership, especially in the names of others, thst DVC can reasonably conclude your in it as a business.

As of today, they have chosen to set that threshold at 20 in a rolling 12 month period.

They can amend and adjust that policy as they see fit as long as it meets FL condo and timeshare law.

But it seems to me that they are on the side of the average owner when choosing how to balance things between the owners out there who are crossing into a commercial business and owners who are renting reservations at a rate they feel is acceptable under the right to rent.

I’m not sure how it would impact resale value, but my guess is it would impact it negatively.

 

[wlm24713]

Suppose renting out DVC points becomes regulated where owners are prohibited from renting out points. Do the point values decrease or increase? Why?

Decrease because you limit the market value.

But regulation is in place to prevent.

 

[sndral]

… I think they'd have to prove beyond a doubt that it's commercial use to be able to take action but even that is hard to prove….

So far DVC seems to be happy w/ a little sabre rattling, but if they choose to take aggressive steps like freezing memberships for certain patterns of use, they hold all the marbles because DVC can act & those affected would have to react & sue.

In contract litigation the level of proof is typically by a preponderance of the evidence (think over 50% probability.)
Next up in the proof ladder is proof by ‘clear & convincing evidence.’
‘Beyond a doubt’ doesn’t exist as a burden of proof, beyond a reasonable doubt is the criminal standard & the highest burden of proof.
As for who would have that burden of proof in litigation, it’s complicated, but usually it depends on who the plaintiff is & what type of relief they’re seeking. Defendant has the burden of proof for affirmative defenses.
DVC could freeze an LLC’s membership for violating the commercial use ban & if the LLC wanted to unfreeze it they’d have to sue DVC & the LLC as plaintiff would likely have the burden of proof.
If DVC froze a thousand memberships because they decided making more than 2 lead guest name changes was prima facie evidence of a violation of the commercial use ban & those 1000 members wanted to join together in a class action suit to get an injunction stopping DVC from freezing accounts for too many lead guest changes, then as the plaintiffs they’d likely have the burden of proof & the burden to get an injunction is the higher clear & convincing + you have to prove more things.
Now, if DVC decided to put the brokers out of business by seeking injunctions on some type of inducing a breach of contract theory, then DVC as plaintiff would have to prove that the brokers were inducing members to breach the no commercial use clause in their contracts w/ DVC & DVC’s burden of proof would be higher because as I noted, to get an injunction carries a much higher burden of proof. But DVC won’t tilt at that windmill, when they anticipate that a change will result in litigation they get their ducks in a row & then make the change, see GAC & DAS litigation.

As for resale value, I suspect there’d be some reduction in value if friction in renting increased - but IME the general state of the economy & the real estate market/interest rates seems to be the biggest driver of resale value, although changes in DVC policy has had an impact - compare the resale value of the unrestricted Poly w/ the restricted Riviera.

 

[Brian Noble]

they hold all the marbles because DVC can act & those affected would have to react & sue.

This.

There is also one other aspect to mention. If DVC goes the route of other developers, they are going to pick the most egregious examples to start. If and when details come out, the rank-and-file owners will tend to side with the developer against Those Nasty Mega-Renters, so not only is there no real goodwill danger, doing this can actually increase goodwill among the ownership at large. That's more or less how it has played out with the other developers who have gone down this road.

 

[intamin]

I guess I should've been a little more specific. Obviously Disney basically holds all the cards. It's their system, their private property. Extending outside of the resort they could ban you from the parks if you don't wear a tutu if they really wanted to because it's private property and essentially make it so you can only stay at your resort. Anyways, do I expect them to go after the little guys renting out their points? No. They'd make an example out of the egregious offenders like the ones chronically renting value studios and Boardwalk resort studios and most people would be on Disney's side like was said. IMO it kind of feels like ROFR where Disney just needs to fire off a warning shot and people will get in line. Anyways, obviously I'm not a lawyer, that was my dad's job and I hated being in the office lol.