Third party commercial renters

[tx911]

You know what could be a really easy solution to this for Disney? (Not advocating, just positing an idea…)

Disney says, “you can rent your points, but you have to rent them to us.” Then, the following:

1. Owner rents points to Disney (at a set price, likely equal to MB, reducing as the points’ expiration date nears),
2. Disney sells a cash reservation using the points, and
3. Points rentals outside this infrastructure are disallowed (much like transferring points for $ is disallowed).

I’m by no means an expert, but it seems to me that this would satisfy the timeshare regulations on renting, kill the secondary rental market, greatly reduce the financial benefit for commercial renters, and provide a simple way for Disney to monitor owners’ rental habits. This would fairly quickly eliminate commercial memberships—as well as competition for Disney’s own cash rentals—plus give the Mouse a big revenue boost. Win-win-win-win-win for Disney, and members concerned about the abuse of commercial renting.

I’ve got to be missing something that explains why this isn’t already happening. 1, 2, 3… Poke holes in my theory!

I had the same thought, but wouldn't Disney then in effect be competing with themselves, selling DVC rentals while at the same time trying to book rooms for cash?

 

[Stormalong Smiths]

.

I had the same thought, but wouldn't Disney then in effect be competing with themselves, selling DVC rentals while at the same time trying to book rooms for cash?

I don’t imagine someone booking a room through Disney would see a difference in these additional rooms (much like they don’t see a difference now between a hotel room vs. a DVC room they’re booking through breakage or points owned by Disney). To that extent, I’m not sure they’d be competing with themselves, per se… To your point, though, I can see Disney being hesitant to increase the number of rooms they have to move (especially since rooms they’ve rented with members’ points would have a lower profit margin than points/rooms they already own). But perhaps the pros would outweigh the cons in this instance?

 

[tx911]

I don’t imagine someone booking a room through Disney would see a difference in these additional rooms (much like they don’t see a difference now between a hotel room vs. a DVC room they’re booking through breakage or points owned by Disney). To that extent, I’m not sure they’d be competing with themselves, per se… To your point, though, I can see Disney being hesitant to increase the number of rooms they have to move (especially since rooms they’ve rented with members’ points would have a lower profit margin than points/rooms they already own). But perhaps the pros would outweigh the cons in this instance?

I've always liked the idea of Disney bringing point rentals under their umbrella. I would be more likely to consider doing it if Disney was running the whole thing.

 

[crisi]

At that point, the fraud becomes a criminal and civil matter for the courts, handled by the victims. DVC is probably very limited to the penalties they can impose, and I don’t think contracts can include forfeiture of property or usage rights as a penalty. So a serial abuser really just faces canceled reservations, which is alluring enough for many to say “catch me if you can”.

As for a right to know, I believe there is a concept in contract law that basically says if terms of a contract are unclear, they default to the other persons interpretation. I tried googling for the term, but can’t find it. A lawyer explained it to me one time that you can’t put a bunch of ambiguous legalese in a contract to dazzle and dumbfound the person signing it- they shouldn’t need a law degree to sign it in other words. One of these hidden lawyers here will pop up and say it because they love showing their knowledge of obscure Latin phrases.

What you are talking about is a completely different concept - language can't be purposefully obscure. That doens't mean you have a right to know.

And as to it being a matter for criminal and civil courts, its possible Disney wouldn't want to wait for that, or want to have that much evidence, or be reliant on the Florida government that doesn't seem to like them much to take care of their reputation. They may want to use the contracts they have in place to do so....and if the government decides to pursue a criminal charge, or the victim a civil one, that's on them. Disney doesn't need to do that, they can pull the contract language out, blow the dust off, and put someone's points on hold. There are often many ways to skin the cat.

 

[Sandisw]

We may think that, but I'm not 100% sure we do have that right - in a legal sense. The contract says "commercial" which gives Disney a wide leeway to define it. In an ethical sense, perhaps Disney owes us guidance, but we also have to understand policy changes - and policy isn't rigid.

Let's take for instance the case where Disney decides its defensible to go after an owner where they get a lot of complaints from renters - its someone who defrauds people - cancelling reservations after half the payment, using those points to rinse and repeat until maybe the fifth guest actually gets to check in. They may never have 20 reservations in a year (certainly not in trips taken) - but three or four complaints might be enough to trigger Disney going after them with the "commercial" clause even if they are below whatever threshold Disney has in place that defines "commercial" renting in policy. I would personally want Disney to have that sort of flexibility - as long as they can defend their decisions

What I meant by right to know when compliance calls, is at that time they have to explain what it is in the membership they are seeing that they are saying is commercial.

So, if I have 5 reservations in the name of others and used a broker to get them, and DVc wants to tell me that is commercial, they have to explain what did I do to cross the threshold, especially since FL law allows for renting of a timeshare.

 

[Sandisw]

You know what could be a really easy solution to this for Disney? (Not advocating, just positing an idea…)

Disney says, “you can rent your points, but you have to rent them to us.” Then, the following:

1. Owner rents points to Disney (at a set price, likely equal to MB, reducing as the points’ expiration date nears),
2. Disney sells a cash reservation using the points, and
3. Points rentals outside this infrastructure are disallowed (much like transferring points for $ is disallowed).

I’m by no means an expert, but it seems to me that this would satisfy the timeshare regulations on renting, kill the secondary rental market, greatly reduce the financial benefit for commercial renters, and provide a simple way for Disney to monitor owners’ rental habits. This would fairly quickly eliminate commercial memberships—as well as competition for Disney’s own cash rentals—plus give the Mouse a big revenue boost. Win-win-win-win-win for Disney, and members concerned about the abuse of commercial renting.

I’ve got to be missing something that explains why this isn’t already happening. 1, 2, 3… Poke holes in my theory!

Because DVC has their own points to rent. If they required owners to only rent through them, they would have to our owners points first because if not, it would be seen as forcing an owner into a situation in which they would not win.

Plus, then DVc has to have an entire system set up to figure out whose points get rented first….during home resort, easy, but what about 7 months?

Makes no sense for DVC to get into the business, especially since someone would have to pay for it.

The best thing is to keep it like it currently is, allow owners to rent on their own, with reasonable rules that most would see as reasonable, and monitor for those who they feel are going to far.

 

[tx911]

The best thing is to keep it like it currently is, allow owners to rent on their own, with reasonable rules that most would see as reasonable, and monitor for severely punish those who they feel are going to far.

 

[Stormalong Smiths]

Because DVC has their own points to rent. If they required owners to only rent through them, they would have to our owners points first because if not, it would be seen as forcing an owner into a situation in which they would not win.

Plus, then DVc has to have an entire system set up to figure out whose points get rented first….during home resort, easy, but what about 7 months?

Makes no sense for DVC to get into the business, especially since someone would have to pay for it.

The best thing is to keep it like it currently is, allow owners to rent on their own, with reasonable rules that most would see as reasonable, and monitor for those who they feel are going to far.

I think they could figure out a way to manage those logistics and still come out ahead. But you’re right that it’s probably easier for them to continue to monitor for (and preferably severely punish as @tx911 has very astutely suggested) suspected violators… with the existing issues likely continuing unless Disney takes some large-scale action against them.

 

[Sandisw]

Haha…canceling the extras is probably the best one can hope for.

 

[tx911]

The best thing is to keep it like it currently is, allow owners to rent on their own, with reasonable rules that most would see as reasonable, and monitor for those who they feel are going to far.

My thought is that those who are engaged in commercial renting damn well know they are doing it, and they know it's against the rules.

If DVC sees clear evidence of it, make the consequences swift and severe, so that not only will the perpetrator stop doing it, everyone else will think twice too.

 

[lowlight]

What you are talking about is a completely different concept - language can't be purposefully obscure. That doens't mean you have a right to know.

Interesting, I thought they would be kind of attached. DVC was purposefully obscure with their term defining commercial, no?

 

[Sandisw]

My thought is that those who are engaged in commercial renting damn well know they are doing it, and they know it's against the rules.

If DVC sees clear evidence of it, make the consequences swift and severe, so that not only will the perpetrator stop doing it, everyone else will think twice too.

The only thing they can do, from what I understand, but not a lawyer, is lock the owner out of furthering using their membership until the situation is fixed.

And, that happens with the cancellation of reservations or allowing he reservations that are within the normal rules of renting to happen.

The bigger problem for DVC, and even for those of here, is that not everyone has the same determination of what the balance should be.

I don’t want strict renting rules…even though I don’t rent…I want reasonable ones, even if it means that some people get away with things.

Others might be willing to live with changes that impact your average owner negatively if It means others are caught.

 

[Judique]

This is just my theory, I may be wrong. It explains why spec rentals boomed during COVID, why strip and flip accelerated, and why 11 month availability of the most in demand weeks and rooms has far accelerated past organic origins, at resorts that have been sold out for many many years (so there is no change in owner patterns).

This syncs pretty well with my BWV experience. Twenty years of the same routine and then myself and my friends can't get what we want for the last 4-5 years.

It was working and then it stopped working.

 

[Sandisw]

Interesting, I thought they would be kind of attached. DVC was purposefully obscure with their term defining commercial, no?

I think because the purpose of DVC is for personal use, the rules regsrding thst is what needs to be clear not the other way around…

If what we are allowed to do within the rules of the contract, and our right to rent, are explained in a reasonable way, then anything beyond that, is, by default, crossing the line into using a membership for commercial purposes.

IMO, it’s why DVc has never, and I’d be shocked to ever see them, make rules on where one can secure a renter or when the name on a reservation is changed.

The 2007 language is the closest we have gotten to clear guidelines and I can’t imagine that any updates to thresholds would be stricter.

 

[crisi]

Interesting, I thought they would be kind of attached. DVC was purposefully obscure with their term defining commercial, no?

No, the term "commercial" is defined in law. There isn't anything obscure about it from a legal standpoint. What Disney is being obscure about is how and if they are going to enforce it and what triggers that enforcement. That's policy, process and procedure. Policy, as Sandy is saying, we have a right to understand as it impacts our own points, but Disney isn't under any legal obligation to make it easy to get to (i.e. they could say "requests for policy need to be in writing, notarized, and delivered via certified mail" if they really wanted to). Procedure and process we probably have no right to (how will Disney determine what to enforce, when to enforce it, how will people be notified, etc).

 

[drusba]

Some thoughts on matters raised in this thread:

A. The IRS Issue

The IRS provisions cited by disneyjanet earlier is this thread do not determine that DVC rentals are a commercial enterprise or commercial use. Besides that none of the IRS provisions cited even mention the words "commercial enterprise," the provision cited that covers sole proprietorships, which includes stating that sole proprietorships are required to pay social security and medicare taxes, applies to sole proprietorships that are set up to be in the business of doing something.

Other IRS provisions that exist actually favor a finding that a member doing some rentals is not engaging in a business or commercial use, unless the member has actually set up such a business for the purpose of doing rentals and that is the member's principal occupation. Under the tax rules, if someone owns real property and rents it out, but the person is not actually in the business of doing such rentals, the income from rentals is not treated the same as business earned income but instead as passive investment income, which is not subject to social security or medicare taxes. See, e.g., IRS tax topic "Topic No. 15, Renting residential and vacation property"; www.stessa.com/blog/is-rental-income-earned-income. Though you can be taxed for the income (minus expenses) from rentals, you cannot be found to be actually conducting a business, and it is not "GIG" income. Id.

You do need to pay taxes on rental income (less expenses), and need to file a schedule E with your federal return, except that if you rent a property for 14 days or less in a year, and you, or relatives, use it for 15 days or more, the rental income is not subject to tax and does not have to be reported. Id.

B. Rentals of Pre-Riviera Resorts

As to rentals, the pre-Riviera DVC Resorts (which includes the VGF Resort Studios as they were added to the prior VGF, and likely the new Poly because it appears it will become part of the old Poly) have essentially the same terms of importance, and prohibit, as a Commercial purpose, a pattern of rental activity” that the Association (in later POS’s the “Board” of the Association) can reasonably conclude constitutes a “commercial enterprise or practice.”

During the mid-2000’s, there were many members that had become professional renters, not by use of rental brokers, but by themselves being in the business of making large numbers of reservations by having control of a large number of points, not just by owning the maximum, but also becoming associate members of other members’ accounts, which allowed them to use those other members’ accounts to make reservations, and also by getting a large number of transfers of points into their accounts from other members – at the time one could do an unlimited number of transfers per year either into or out of one’s account, but not both. The internet was the main source used to find members who wanted to rent. To address that problem, DVC adopted three changes: (a) it changed the transfer rule to once per use-year (which had actually been the original transfer rule until the early 2,000’s); (b) it adopted a rule limiting the number of accounts on which a member could be an associate member to four; and (c) in 2008, it adopted a rule which stated that if a member made more than 20 reservations in a year, a presumption would be created that the member was violating the commercial purpose/enterprise rule and reservations in excess of 20 would be canceled unless the member established that the member was not violating the rule.

Thereafter, DVC took action against a number of members it believed were violating the new rules created. It was after that time that rental brokers, which included at least some of whom were actually members who had previously been professional renters before the changes, became a principal method of doing many DVC rentals, again via use of the internet. Brokers I am aware of are not renting lots of points they own, but instead are the source for many owners to do rentals.

When that 20-rental rule was adopted, DVC members could likely have challenged it under ¶718.110(13) of the Florida condominium statutes. When setting up condominium resorts, a developer can create restrictions to rentals. However, once sales occur, that statute applies and provides the following:

"An amendment prohibiting unit owners from renting their units or altering the duration of the rental term, or specifying or limiting the number of times unit owners are entitled to rent their units during a specified period, applies only to unit owners who consent to the amendment and unit owners who acquire title to their units after the effective date of that amendment."

In other words, DVC likely cannot legally add new rental restrictions like many that have been proposed in this thread, except by submitting them to a vote of the members, and then, even if passed, members who vote against the changes are not required to follow them.

The 20-reservation rule was not challenged at the time because it made sense. Someone doing more than 20 reservations in a year is likely doing a lot of rentals and violating the commercial purpose rule, although the member could avoid any penalty by showing he was not violating the commercial purpose rule. At the same time, that 20 reservation rule provided strong evidence that could later be used in any legal case involving DVC’s trying to create more onerous restrictions to the right to rent to the pre-Riviera resorts, i.e., it shows that DVC itself believed the right to rent provided in the POS’s allowed members to do a lot of rentals.

Moreover, case law strongly supports the right of an owner to rent, and follows a rule that any restrictions created to limit an owner’s ability to do rentals shall be strictly construed against prohibiting rentals unless the restrictions clearly prohibit the activity, and restrictions against “business” or “commercial” use have been held to be not clear enough to create such a restriction . See, e.g., Santa Monica Beach Property Owner’s Association, Inc. v. Acord, 219 So. 3d 111 (Fl. App. 2017) (finding that a rule prohibiting owners from using their property for any “business purpose” did not prevent an owner from doing multiple short-term, vacation rentals because the restriction that existed failed to explicitly preclude the owner from doing such rentals); Laursen v. Giolli, 549 So.2d 1174 (Fl App. 1989) (recognizing that an owner’s renting one’s property to others would generally not be considered a commercial use prohibited by applicable restrictions, but an owner’s actually converting his home to a year-round, profit-making, assistant living facility that provides workers and services to the residents for a monthly charge, is acting as an actual business and thus as a prohibited “commercial enterprise”).

Also, the suggestion that DVC could alternatively sue the rental brokers to stop rentals, including for trademark violations, likely would not succeed. The brokers I am aware of are not set up to rent points they own. They are renting points provided by their member customers, who actually do the renting. DVC does not have a contract with those brokers relating to their rental activity. It is a fair use of any trademark for the renting member and the rental broker to name the resort and type of room that is available to rent, and thus DVC likely does not have a valid trademark violation claim to pursue. Moreover, "DVC" is not a Disney trademark. That is because some company that made paint-related items got that trademark before Disney's DVC even existed.

C. Riviera and Later Resorts

The Riviera Declarations, §12, make changes of importance to the right to rent that did not exist before Riviera was added. It eliminates the requirement that any decision made by the Board (or DVCM) to find a violation of the commercial purpose/enterprise provisions has to be “reasonable,” and instead says the association (or DVCM) shall be the “sole determiner” as to whether there is any violation of the commercial purpose restrictions. It also expressly declares, in §12.1.3, that it can cancel any reservations or remove anyone from the property if the reservation is found to be a prohibited one under ¶12. It then adds it can conclude:

"[A}n owner is engaged in a commercial enterprise as a result of a pattern of rental activity of reserved Vacation Homes or frequent occupancy by others of reserved Vacation Homes, other than the Owner’s family, use of regular rental or resale advertising, maintaining a rental or resale website, or frequent purchase and resale of Ownership Interests whether in the name of the Owner or those related to the Owner.”

In other words, the owner can possibly be found, in a decision that cannot be challenged on the basis of reasonableness, to be acting as a commercial enterprise in violation of the rental restriction for doing nothing more than “frequent” reservations for people not having the same name as the owner. Moreover, with sole power to make any decision, and the lack of a reasonableness standard, DVC could possibly, if it wanted to, also find such “fequency” exists for only two or three reservations.

I am assuming VDH has similar provisions. I know CFW does. What appears to be happening is that DVC has, starting with Riviera, decided to make it easier for it to accuse members of violating the commercial enterprise restriction even though it cannot easily determine that the member is actually acting as a commercial enterprise as understood in the law. In other words, DVC may still allow rentals but can use the new rules for finding out if a member is actually acting as a commercial enterprise, since it can easily determine from its own records that a member has been making reservations for persons other than those with the same name as the member, and then have the member explain why they are not rentals.

D. Other Rental Restrictions

On a possible enforcement side is the corporation and maximum ownership provisions in the POS, found in the beginning of the home resort opening Public Offering Statement Text. Some have memtioned the belief that many of these professional renters have actually set up businesses along with other members. Apparently many are unaware that the POS's expressly prohibit members that are corporations (which would include LLC's) or "other business entities" which would include partnerships or agreements with other members to do rental reservations) are limited to allowing only directors, officers, principals, or employees of the business entity to actually use any DVC rooms, i.e., they cannot rent to anyone other those corporate-related personnel. Moreover, the 4,000 home resort/8,000 all resorts point total rule is a combined party rule. A member's having multiple memberships, or any members who are acting together to do rentals or reservations, cannot together own moire than 4,000/8,000 total points. Thus, if there currently are such business entities, as some have mentioned, DVC could shut them down from doing reservations.

E. Possible Allowed New Rules

There are about 250,000 DVC memberships ( that was the last total I saw and was provided end of 2022, and the number of members are more since that counts joint owners, such as husband and wife, as one). Thus, over any 11-month period one can likely expect at least about 200,000 total reservations. Redweek's 1,200 such reservations, shown over an 11-month period, would thus be less than 0.6% of all reservations. Moreover, going through them, it appears that at least about 700 of them are for rooms that have no problematic 11-month-out reservation issue, e.g., SSR. OKW, Poly, BCV, BRV, BLT lake view, Kidani, Jambo rooms other than value or club level, VGF Resort Studios, VGC studios, and Aulani studios, and there are likely more because the Redweek lists for resorts like BLT, BWV, and Riviera for most studio rentals do not tell you whether the room is standard view (the ones that may have an 11-month issue) or other views. As noted, the Redweek list has a lot of single night reservations for rooms that have a 11-month-out reservation issue such as AKV value and club level, BWV, Riviera standard view and Tower studios. My guess is those are not reservations made right at 11-months out, when members who would be renting would most likely attempt to get multiple nights. Instead, they are members likely waiting for walkers to pass by or other cancellations and grab an opening that becomes available as a result.

A few months back, I went through the resort reservations shown for the DVC Rental Store (dvcrentalstore.com) which listed more than 400 reservations, which many members also blamed for the inability to reserve hard to get rooms for hard to get times. What I found in that list is that a large percentage of the rooms were for reservations usually easy to get, including a large number of SSR, OKW, and Kidani reservations usually available even at 7-months out. At the time, the list had only 6 total reservations combined for AKV value, AKV club level, and BWV standard studios. There were no single day reservations. There were also a significant number of reservation that were 30-days or fewer out, meaning all the points would end up in holding if the reservation was not purchased, indicating those were likely the result of members not being able to use a reservation, and thus not something being pursued by professional renters. Thus, what you may see on Redweek is not necessarily what you are going to find with other rental brokers. Moreover, even if renting were done away with, that would likely not mean that members will be able to easily get those hard to get reservations such as AKV value studios. The same 11-month problem would likely still exist just from all the members trying to actually reserve the rooms for their own use.

Nevertheless, if there is a need to further limits to rentals, there are rules that DVC could create, which I have mentioned before, that would not require further limiting the rights of an owner to make reservations. Since walking likely aids professional renters in getting reservations, DVC could easily do away with most walking by simply adopting the reservation rule that existed before mid-2008: One could reserve a room beginning 11 months out from date of departure from DVC (or 7-Months for non-home resorts). Thus, today June 23, you could reserve home resort only for a reservation that ends on May 23. Thus, if you wanted to walk a reservation to the June 1 to 7 dates, would have to reserve the night of May 22 today, then tomorrow morning at 8.a.m. try for May 23 when you will be competing with others desiring to get that date because the May 22 reservation you have will not prevent the May 23 night from disappearing to others seeking reservations. Result: the only way you can walk a reservation is every morning at 8 a.m. try to get a new end date, while competing with others for the same date. In other words, to do a walk would require attempting to reserve a night every day at 8 a.m. and getting lucky every day.

The POS documents actually require members to get rentals using a written contract with terms to show the renter has to follow the rules applicable to using a room and resort facilities. If a problem DVC has is actually determining who are doing too many rentals, DVC could require members who are renting to provide such written contracts when a rental is done to assure they are properly done. It could also state that failure to submit a rental agreement when there is a rental may result in cancellation of the rreservation if DVC learns it is rental. If informed of that requirement, the person considering renting from the member would most likely insist on the rule being followed. Professional renters would have a real problem if they failed to submit a rental agreement and failed to tell the renter of the requirement for such submission. If the reservation was thereafter canceled for failure to submit the contract, the renter would have a claim not just for damages, but for punitive damages for fraud against the renting member.

 

[kilik64]

There’s really only two ways to define it- legally, or intent. Legally, if you’ve profited off of renting, you’ve commercially rented right? The less clear standard is intent. “I bought my points to rent them”. Nobody is going to admit to intent, so what other choice is there except legal definition of a commercial activity? Selling something on Facebook is a commercial activity if you made above a certain amount. Of course DVC can use whatever standard they want, but they’ve been unclear about it and I don’t think they have the legal right to sell a contract that is stated as for personal use only with the “right to rent” without spelling out exactly, to the letter, what that encompasses. It’s not fair to those who want to rent and it’s even less fair to those of us who didn’t realize we would be competing with LLC’s third party renters while trying to secure a reservation. I would go back in time and unwind my purchase if that was acceptable use. It wasn’t presented that way. I still haven’t gotten my first week of December reservation from the waitlist, but I can go rent it if I want to. Ridiculous.

Yea has nothing to do with December being a busy dvc time.

 

[lowlight]

Yea has nothing to do with December being a busy dvc time.

I dare say Watson, all this time and that thought never occurred to me.

 

[kilik64]

I dare say Watson, all this time and that thought never occurred to me.

Doesn’t seem like it?

 

[DougEMG]

You know what could be a really easy solution to this for Disney? (Not advocating, just positing an idea…)

Disney says, “you can rent your points, but you have to rent them to us.” Then, the following:

1. Owner rents points to Disney (at a set price, likely equal to MB, reducing as the points’ expiration date nears),
2. Disney sells a cash reservation using the points, and
3. Points rentals outside this infrastructure are disallowed (much like transferring points for $ is disallowed).

I’m by no means an expert, but it seems to me that this would satisfy the timeshare regulations on renting, kill the secondary rental market, greatly reduce the financial benefit for commercial renters, and provide a simple way for Disney to monitor owners’ rental habits. This would fairly quickly eliminate commercial memberships—as well as competition for Disney’s own cash rentals—plus give the Mouse a big revenue boost. Win-win-win-win-win for Disney, and members concerned about the abuse of commercial renting.

I’ve got to be missing something that explains why this isn’t already happening. 1, 2, 3… Poke holes in my theory!

What is missing is that a lot of owners are international owners, this seems to cause issues for Disney around how they do thing. As an example, international owners are not eligible for magical beginning, ie they can not rent those current points back to Disney when buying a contract. I would have loved to do that and gotten in on that direct OKW sale they just had. I am assuming that it has something to do with the tax system.