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.