VDH - Resale and Use Restrictions Legal in CA?

[AmicusDye]

I saw that there were some threads discussing the legality of RIV restrictions a couple of years ago, but haven’t seen anything posted recently, and none of those threads discuss these issues through the lens of California law. Now that restrictions are coming to the most litigious state in the country (CA), I took a quick look. In fairness, I looked into this for all of about 20 minutes, but it seems ripe for an individual or class claim if the VDH news is true.

Let me explain...

I fully understand if Disney wants to promote direct sales by clamping down on the resale market. I would argue a robust resale market makes direct purchase even more attractive because it offers prospective owners with peace of mind knowing that if they need to sell they will be able to do so and recover most of their original investment. Regardless, to make direct sales more attractive, the perks Disney had traditionally added for buying direct (access to lounges, etc.) were fine, because none of those perks impacted the property rights of owners of other resorts. Those perks merely made it more attractive to buy those specific property rights from Disney directly.

However, by allowing RIV and now VDH direct purchasers to have access to sister resorts, but not allowing resale owners at other resorts to access rooms at RIV and VHD, Disney is creating non-mutual rights within the ownership. This fundamentally changes the rights of existing owners. In California, it seems destined for litigation given the state’s unique timeshare laws.

Here's what I mean...a substantial portion of VGC owner are resale owners. As VGC owners, they have purchased the rights to priority booking (11 mo.) at their home resort and non-priority (7 mo.) booking at other resorts. In that sense, the rights between all owners (regardless of from whom the points are purchased) throughout the DVC ownership are mutual and equal. Adding new resorts without restrictions only “expands the pie” so to speak, having no fundamental impact on ownership rights.

Now, however, for all intents and purposes, VDH does not exist for VGC owners. These owners would not even see VDH as an option for booking. Nevertheless, at the 7 month mark, VGC owners must now contend with thousands of new “owners” trying to reserve rooms at VGC while having no new corresponding accommodations at VDH available to them. This would appear to violate California’s Time-Share Act of 2004 (CTSA), specifically Cal. Bus. & Prof. Code § 11250. Again, I have not done an exhaustive search, so there may be other statutes or decisions addressing this issue. Moreover, in CA, standing to bring a lawsuit is broad, so anyone with an ownership interest can bring a suit. Additionally, I have not taken the time to review all of the originating documents in detail (resort agreement, membership agreement, master cotenancy agreement, etc.) and am not sure if it is all available online, but the original membership agreement provides for the award of attorneys’ fees and costs in the prevailing party in a lawsuit.

All of this to say is that there appears to be an avenue for a suit where damages, injunctive relief, and attorneys’ fees are all available to an enterprising owner and attorney. This is California, we got a whole lot of both here.

Has anyone else looked into this more deeply or can set me straight on any of this? Maybe I am fundamentally misunderstanding some aspect of this? Happy to listen if I am.

 

[CaliAdventurer]

Most VGC members are pre 2019 resale or direct. Any of us who bought resale since then and certainly since Riviera, knew the terms for the future and chose not to pay $300+/- from Disney directly. I imagine you’d have to prove you didn’t have any access to that information, which seems like and impossibility since it’s in the contract.

 

[DonMacGregor]

This should be interesting…

 

[DonMacGregor]

Most VGC members are pre 2019 resale or direct. Any of us who bought resale since then and certainly since Riviera, knew the terms for the future and chose not to pay $300+/- from Disney directly. I imagine you’d have to prove you didn’t have any access to that information, which seems like and impossibility since it’s in the contract.

I think part of the question being asked is if that contract / POS language is compliant with California timeshare law. It was certainly drafted we’ll before a resale restriction was an issue in California (and possibly even before VDH was actually greenlit?).

 

[Sandisw]

The restrictions come in to play when an owner chooses to change home resort points into BVTC for other resorts. On that sense, it’s no different then partnering with RCI or II..just that BVTC is run by DVC.

I don’t know CA law, but FL law seems to define things in terms of home resort and that whether buying resale or direct, they can’t have different rules for the home resort.

However, I have not found anything that suggests that they can’t make different rules with BVTC for exchanges and the DVC resort agreements spells it out

Now, for RIV, there are some who believe that because the initial DVC resort agreements with BVTC had a clause that all resorts would be substantially similar if added, RIV should not have been allowed to become a DVC resort.

But those agreements were amended with the addition of RIV and all owners who bought with those original terms still have access to all resorts as they were grandfathered in with the same terms under which they bought.

That language was removed in 2019, and from that point forward all owners buy with the new terms. DVD obviously believes they are on legal footing with it And the contract does allow for changes at BVTC discretion.

Do I personally think it would withstand a legal challenge? No. But I know others might.

I would say one has to start with CA timeshare law as it relates to exchanges because home resort access is no different for VDH direct or resale buyers.

 

[DonMacGregor]

I’ll just say this: if “Well, it’s in the contract” was the only affirmative defense you ever needed, I’d be out of a job…

 

[Sandisw]

I’ll just say this: if “Well, it’s in the contract” was the only affirmative defense you ever needed, I’d be out of a job…

Of course there could be things in a contract that some might challenge..case in point if someone lies and says x and the contract says y.

But, by the same token, just because someone doesn’t think it should happen, doesn’t make it illegal either.

 

[DonMacGregor]

But, by the same token, just because someone doesn’t think it should happen, doesn’t make it illegal either.

Well, I think that’s the specific point of the thread: an exploration of legal analyses regarding California law relative to resale restrictions. I think too often, the response to probative posts is the typical fallback to “well, that’s what the contract/POS says”.

 

[Sandisw]

Well, I think that’s the specific point of the thread: an exploration of legal analyses regarding California law relative to resale restrictions. I think too often, the response to probative posts is the typical fallback to “well, that’s what the contract/POS says”.

I get that and while I know DVD and other companies may try to bend rules using ambiguous language and threading the needle, I just don’t think that this is one that they applied lightly.

I realize some believe that the divisions thst oversee timeshare creation for the stste and review these things are rubber stamps, it would seem to me that if they are getting through there is some legal standing they think they have.

As I said, I don’t know anything about CA timeshare law to make a judgment but thought my own research regarding FL and RIV might be useful!

 

[DonMacGregor]

I get that and while I know DVD and other companies may try to bend rules using ambiguous language and threading the needle, I just don’t think that this is one that they applied lightly.

I realize some believe that the divisions thst oversee timeshare creation for the stste and review these things are rubber stamps, it would seem to me that if they are getting through there is some legal standing they think they have.

As I said, I don’t know anything about CA timeshare law to make a judgment but thought my own research regarding FL and RIV might be useful!

Nobdy’s saying anything. It’s just a question for discussion.

 

[Sandisw]

Nobdy’s saying anything. It’s just a question for discussion.

I was making a reference to the comment that people will ultimately say “it’s in the contract” or “ it’s illegal”.

Here is a good place for anyone to start. https://www.dre.ca.gov/files/pdf/timeshare_manual.pdf

 

[DonMacGregor]

I was making a reference to the comment that people will ultimately say “it’s in the contract” or “ it’s illegal”.

Not sure anyone said “it’s illegal”, but ok.

What I DID say was that typically, when these questions are raised, the response is often “it’s in the contract” or, “it’s in the POS”, and it would be refreshing to hear if anyone qualified to do so, has looked at those documents in light of California law. That’s all.

 

[Sandisw]

Not sure anyone said “it’s illegal”, but ok.

What I DID say was that typically, when these questions are raised, the response is often “it’s in the contract” or, “it’s in the POS”, and it would be refreshing to hear if anyone qualified to do so, has looked at those documents in light of California law. That’s all.

I didn’t mean to imply you said that…I wasn’t clear…just that statement is usually the other argument to “it’s in the contract” but because this peeked my curiosity , this is the language that discusses exchanges…or appears to be from CA timeshare guidelines…this seems to indicate exchange rules are at discretion of developer.

 

[CarolynFH]

I haven’t looked at the law, but I know that Marriott, which operates several timeshares in California, has similar restrictions on resales. As Sandi points out, it has to do with exchanging out of one’s home resort within the Marriott system, not using the home resort.

 

[starry_solo]

Here's an interesting FAQ from the Department of Real Estate in CA:
https://dre.ca.gov/files/pdf/faqs/FAQ_Timeshares.pdf

The last FAQ seems to answer the question:

If a purchaser is contemplating the purchase of a time-share interest, he or she should not expect there to be an absolute right to use any other time-share project that is affiliated by means of an exchange company arrangement, a reservation system through a membership program, or contract with other member time-share projects (if the purchase involves a specific time-share interest in a multi-site time-share plan). There is no guarantee that an exchange company or a membership program involving other time-share projects will continue to exist in order to provide the reservation services promised. The companies offering these programs may go out of business or terminate their exchange programs or membership programs for any number of reasons. Also, they may discontinue their affiliation with the time-share plan in which a person owns a time-share interest. A time-share purchaser should rely only on the continuing rights he or she has with regards to the time-share plan in which he or she has an ownership interest.

 

[Great3]

Resales of VDH deeds are restricted from trading out of VDH, to balance out the resales of others not being able to trade into VDH. Those that brought direct with VGC has same rights as those who will buy direct with VDH.

Right, Wrong, or Whether or not this creates a true balance or not, DVC decided already, the rest can decide to take it or litigate against it. Those with the energy, have at it! I am sure DVC/DVD/Disney is quite lawyered up already, so good luck to those that want to try!!!

Great3

 

[ocdb8r1]

My only input on this is that just because this is "novel" for DVC (in CA...as it's been the case in FL with Riviera for some time now) doesn't mean it's novel in the timeshare world. There are a number of timeshare systems (existing in CA) that operate in the same way as DVC has proposed for VDH.

In short, as has been summarized above, when you buy VDH points the only thing you are buying is a right to reserve VDH at 11 months. Any ability to reserve other DVC resorts is formally an "exchange" and no legal rights attach to such (and DVC has wide discretion to set the participation, terms and availability of any such exchange).

The one implication (which I posted about in one of the other VDH threads) of the "exchange" abilities existing on some points (direct) and not on other (resale) is that DVC will have to ensure some "balancing" in the exchange (in other words, you cannot have more points trading IN to VDH than are trading OUT, otherwise you risk creating a situation where owners with resale points only able to book VDH have no access to inventory as it has been taken by direct points owners trading in). This is not novel and Marriott has had to do this for years with their points product. It also likely doesn't "bite" until very far down the line when you have a significant number of points owned at any one resort that are "restricted" from exchanging into other DVC resorts.

 

[Brian Noble]

My only input on this is that just because this is "novel" for DVC (in CA...as it's been the case in FL with Riviera for some time now) doesn't mean it's novel in the timeshare world. There are a number of timeshare systems (existing in CA) that operate in the same way as DVC has proposed for VDH.

Exactly so. For example, Diamond deeds purchased from the developer are enrolled in "The Club". On resale, they revert to the underlying resort/trust/collection of resorts at which they are deeded. There are several Diamond resorts in California.

 

[KAT4DISNEY]

I saw that there were some threads discussing the legality of RIV restrictions a couple of years ago, but haven’t seen anything posted recently, and none of those threads discuss these issues through the lens of California law. Now that restrictions are coming to the most litigious state in the country (CA), I took a quick look. In fairness, I looked into this for all of about 20 minutes, but it seems ripe for an individual or class claim if the VDH news is true.

Let me explain...

I fully understand if Disney wants to promote direct sales by clamping down on the resale market. I would argue a robust resale market makes direct purchase even more attractive because it offers prospective owners with peace of mind knowing that if they need to sell they will be able to do so and recover most of their original investment. Regardless, to make direct sales more attractive, the perks Disney had traditionally added for buying direct (access to lounges, etc.) were fine, because none of those perks impacted the property rights of owners of other resorts. Those perks merely made it more attractive to buy those specific property rights from Disney directly.

However, by allowing RIV and now VDH direct purchasers to have access to sister resorts, but not allowing resale owners at other resorts to access rooms at RIV and VHD, Disney is creating non-mutual rights within the ownership. This fundamentally changes the rights of existing owners. In California, it seems destined for litigation given the state’s unique timeshare laws.

Here's what I mean...a substantial portion of VGC owner are resale owners. As VGC owners, they have purchased the rights to priority booking (11 mo.) at their home resort and non-priority (7 mo.) booking at other resorts. In that sense, the rights between all owners (regardless of from whom the points are purchased) throughout the DVC ownership are mutual and equal. Adding new resorts without restrictions only “expands the pie” so to speak, having no fundamental impact on ownership rights.

Now, however, for all intents and purposes, VDH does not exist for VGC owners. These owners would not even see VDH as an option for booking. Nevertheless, at the 7 month mark, VGC owners must now contend with thousands of new “owners” trying to reserve rooms at VGC while having no new corresponding accommodations at VDH available to them. This would appear to violate California’s Time-Share Act of 2004 (CTSA), specifically Cal. Bus. & Prof. Code § 11250. Again, I have not done an exhaustive search, so there may be other statutes or decisions addressing this issue. Moreover, in CA, standing to bring a lawsuit is broad, so anyone with an ownership interest can bring a suit. Additionally, I have not taken the time to review all of the originating documents in detail (resort agreement, membership agreement, master cotenancy agreement, etc.) and am not sure if it is all available online, but the original membership agreement provides for the award of attorneys’ fees and costs in the prevailing party in a lawsuit.

All of this to say is that there appears to be an avenue for a suit where damages, injunctive relief, and attorneys’ fees are all available to an enterprising owner and attorney. This is California, we got a whole lot of both here.

Has anyone else looked into this more deeply or can set me straight on any of this? Maybe I am fundamentally misunderstanding some aspect of this? Happy to listen if I am.

I have always been in the camp that admitting RIV into the existing DVC was a violation of the POS. VDH just extends that violation.

 

[_auroraborealis_]

It is fair to say DVC has some dubious legal moves in the past, and it is not unreasonable to review to determine if they did it again.

I am thinking of both Aulani and the OKW extension, both of which were truly dumb moves.