What can go wrong

[salmoneous]

Before my post, a bit of an explanation. My main interest in this forum is renting - any purchace would be down the road. But I've still be studing the concept because what I do for a living - and for fun (yes, I'm a geek) - is analyze deals. So I've enjoyed reading all the great information you guys have posted, run the numbers every which way, etc. One thing I always include in analysis is "what can go wrong?" So below are a few scenarios for which I'm curious what the contractual and legal safeguards are. Just to be clear, these are unusual circumstances - not things I believe likely or am "worried" about. I hope people will consider this to be an interesting conversation, and not an attack on DVC. That said…

1) What if something horrible happens? There is negligence; lots of people die; there is a $100 million judgement; there is no insurance. Do DVC owners have any personally liability in these situations (i.e. can they come after the owners after they have exhausted all the assets of DVC?)

2) What if something bad happens (uninsured storm/mold/whatever damage perhaps)? The members vote for a huge one-time maintenance payment. I can't afford to pay. What happens?

3) What if somewhere down the road maintenance costs skyrocket, and the desirability of staying at DVC has plummets, to the point where the annual dues are more than anyone would pay to stay in the resorts. I don't want to keep paying my dues, nobody wants to buy my membership. Can I just walk away, or do I have a legal obligation to pay whatever I am charged?

4) What happens when Disney gets greedy? Somewhere down the road, Disney will stop selling new DVC units and thus be less inclined to treat existing members well. Also, as a corporation, there will be pressure to increase profits from DVC.

4a) I know the membership can fire Disney as the property managers, but what stops them from entering into, say, long-term high-cost contracts with another Disney subsidiary to provide maintenance?

4b) What influence can essentially-Disney-owned local government agencies (Reedy Creek, etc.) have over DVC - can they levy huge fees or anything?

4c) If there is friction between DVC members and Disney, what happens at a resort like VWL, which is hugely dependent upon Disney? For example, the resort is surrounded my Disney private property. Is Disney contractually required to allow access?

5) Can point costs be levelized? I've seen conflicting information on this one. I know the total yearly points can't really be changed. But could a decision be made to, say, charge the same number of points every night of the year - lowering costs to people who stay at peak times and weekends, but devastating the people who just bought enough points to stay off-peak Sun-Thurs

Much thanks to any information you guys have,
Sal

 

[traycie2201]

I read your post with interest and i'm sorry i can't answer any of your questions, i guess from my point of view there are so many if's and but's in nearly every area of life that it is impossible to be prepared for any of them, i guess the only thing you could do is a) only buy what you can afford to lose, b) ask a dvc rep c) don't buy
I'd be interested to see if anyone has any more specific answers for you and sorry i couldn't help, however i am an impulse buyer and fell in love with DVC as do many and these questions didn't ever enter my head

 

[spiceycat]

1) Wdw and DVC both have very good insurance.... (the real that there was no asseement on VB - it got hit hard by 2 hurricanes)

2) not likely to happen. WDW has done several hotels - none (except for the Polyn) have ever reported a mold problem (oh I forget the CBR). Right now WDW is taking very good care of the DVC. there is always someone working on something. remember the fees to take care of this place comes from your maintence fees. They are high for a reason. WDW does a good job!!!

3) considering that most of the DVC will quit in 2042 and the rest in 2054 - this can't happen. Disney gets the property back they certainly won't allow it to be run down.

Disney, in our contracts, don't have to rebuild the resorts at all. I think that is the way they would do if something horrible actually happened.

4) the maintence fees by law can't be for profit. they must be used to kept the property up. the reserve are for future problems. considering that the members must pay to kept up the property, administration, Member service and any other costs from DVC - then WDW has nothing to complaint about.


4a) if the members vote to go with another company beside Disney. they have the right to have their own contracts. (like a new owner)

4b) they can only charge for work they do or services they provide.

4c) disney has to allow access.

all of these imply that members would quit Disney....I don't think that is EVER going to happen....most members are very, very, very happy with Disney maintence, mangement, etc....

5) points can be changed. the total points (all the points in the year) can't be changed. So yes, if DVC decided to charge the same points for a studio no matter what time of year - they definitely can. Will they? Highly unlikely.

a couple of years ago - WDW changed their room prices to regular season for Oct, Nov - DVC has not. I really though they might start to charge early Dec and thanksgiving more points. they haven't....

So I know don't think they will change the DVC points schedule again. I think they don't want complaints from 100,000 people......

 

[Chuck S]

Before my post, a bit of an explanation. My main interest in this forum is renting - any purchace would be down the road. But I've still be studing the concept because what I do for a living - and for fun (yes, I'm a geek) - is analyze deals. So I've enjoyed reading all the great information you guys have posted, run the numbers every which way, etc. One thing I always include in analysis is "what can go wrong?" So below are a few scenarios for which I'm curious what the contractual and legal safeguards are. Just to be clear, these are unusual circumstances - not things I believe likely or am "worried" about. I hope people will consider this to be an interesting conversation, and not an attack on DVC. That said…

1) What if something horrible happens? There is negligence; lots of people die; there is a $100 million judgement; there is no insurance. Do DVC owners have any personally liability in these situations (i.e. can they come after the owners after they have exhausted all the assets of DVC?)

Disney carries insurance.

2) What if something bad happens (uninsured storm/mold/whatever damage perhaps)? The members vote for a huge one-time maintenance payment. I can't afford to pay. What happens?

Dues payments must be current for you to use your points.

3) What if somewhere down the road maintenance costs skyrocket, and the desirability of staying at DVC has plummets, to the point where the annual dues are more than anyone would pay to stay in the resorts. I don't want to keep paying my dues, nobody wants to buy my membership. Can I just walk away, or do I have a legal obligation to pay whatever I am charged?

You have a legal obligation. Most likely, Disney would foreclose and sell your interests, and you would have to pay any remaining balance. It would be the same at any timeshare.

4) What happens when Disney gets greedy? Somewhere down the road, Disney will stop selling new DVC units and thus be less inclined to treat existing members well. Also, as a corporation, there will be pressure to increase profits from DVC.

By law, Disney can only charge a reasonable management fee plus actual costs of running the resort (employees, taxes, maintenance) plus a reserve fund.

4a) I know the membership can fire Disney as the property managers, but what stops them from entering into, say, long-term high-cost contracts with another Disney subsidiary to provide maintenance?

I would imagine any legitimate proposal from the DVC members to fire Disney would also include approval of a proposed contract with another company, like Marriott.

4b) What influence can essentially-Disney-owned local government agencies (Reedy Creek, etc.) have over DVC - can they levy huge fees or anything?

I'd be more concerned about the State of Florida tacking on enviromental fees etc.

4c) If there is friction between DVC members and Disney, what happens at a resort like VWL, which is hugely dependent upon Disney? For example, the resort is surrounded my Disney private property. Is Disney contractually required to allow access?

Disney can not deny access to DVC members holding legitimate reservations...they had to provide road access to Fairfield for Bonnet Creek

5) Can point costs be levelized? I've seen conflicting information on this one. I know the total yearly points can't really be changed. But could a decision be made to, say, charge the same number of points every night of the year - lowering costs to people who stay at peak times and weekends, but devastating the people who just bought enough points to stay off-peak Sun-Thurs

That could happen..It is quite a complicated formula. In fact, points have been re-allocated once...at OKW in 1996. Overall, the changes were minor. It is, IMO extremely unlikely that we will see a major change, at least until the last year or so of the DVC program.

 

[Poorman]

Before my post, a bit of an explanation. My main interest in this forum is renting - any purchace would be down the road. But I've still be studing the concept because what I do for a living - and for fun (yes, I'm a geek) - is analyze deals. So I've enjoyed reading all the great information you guys have posted, run the numbers every which way, etc. One thing I always include in analysis is "what can go wrong?" So below are a few scenarios for which I'm curious what the contractual and legal safeguards are. Just to be clear, these are unusual circumstances - not things I believe likely or am "worried" about. I hope people will consider this to be an interesting conversation, and not an attack on DVC. That said…

1) What if something horrible happens? There is negligence; lots of people die; there is a $100 million judgement; there is no insurance. Do DVC owners have any personally liability in these situations (i.e. can they come after the owners after they have exhausted all the assets of DVC?)

2) What if something bad happens (uninsured storm/mold/whatever damage perhaps)? The members vote for a huge one-time maintenance payment. I can't afford to pay. What happens?

3) What if somewhere down the road maintenance costs skyrocket, and the desirability of staying at DVC has plummets, to the point where the annual dues are more than anyone would pay to stay in the resorts. I don't want to keep paying my dues, nobody wants to buy my membership. Can I just walk away, or do I have a legal obligation to pay whatever I am charged?

4) What happens when Disney gets greedy? Somewhere down the road, Disney will stop selling new DVC units and thus be less inclined to treat existing members well. Also, as a corporation, there will be pressure to increase profits from DVC.

4a) I know the membership can fire Disney as the property managers, but what stops them from entering into, say, long-term high-cost contracts with another Disney subsidiary to provide maintenance?

4b) What influence can essentially-Disney-owned local government agencies (Reedy Creek, etc.) have over DVC - can they levy huge fees or anything?

4c) If there is friction between DVC members and Disney, what happens at a resort like VWL, which is hugely dependent upon Disney? For example, the resort is surrounded my Disney private property. Is Disney contractually required to allow access?

5) Can point costs be levelized? I've seen conflicting information on this one. I know the total yearly points can't really be changed. But could a decision be made to, say, charge the same number of points every night of the year - lowering costs to people who stay at peak times and weekends, but devastating the people who just bought enough points to stay off-peak Sun-Thurs

Much thanks to any information you guys have,
Sal

Dean,where are you???????

 

[Goofy's apprentice]

Not to offend....but if I had this many worries, I don't think I would step out of the house in the morning....

DVC carries similar risks as other timeshares, condo corporations etc etc.

Weigh these worries against reducing the worry over how I'll be saving for my next vacation! against the worries of chosing a vacation destination/resort that I have no experience with!

Replace that with the worries of:
- how many of the fabulous restaurants will I be able to fit into my next vacation
- how much more exciting will the fireworks be next year
- how can I fit it all in two weeks a year

That set aside...very interesting questions...no doubt that Disney does this because it makes them money. They wouldn't if it didn't. But if my family is happy and enjoys it every year. I'm ok.

 

[Dean]

Dean,where are you???????

LOL, here's my take. I'm only going to answer the worst case scenario for the most part because those are the questions being asked.

1. No personal liability.

2. No different than if the same happens to your home. You are financially liable and DVC could sue you for all the amounts due. Worst case scenario would likely be foreclosure, a bad credit rating and court costs. They could also decide not to rebuild the resort and walk away. You'd be left with essentially nothing, also unlikely though the risk is somewhat higher IMO for VB and HH.

3. Same as #2 from a financial standpoint.

4. While I'd agree with the other answers, it may not be that simple. DVD is in control and if they decide they want to generate extra costs for some reason, they can do so. The more likely scenario is simply that costs go up enough to make owning prohibitive.

4a. DVD could sublet the management and the members could vote DVD out. I too think this is unlikely though. If it did happen, I'm sure costs would go up as Disney would try to milk any resorts not part of their system.

4b. Is a real possibility and members would have the same recourse as you'd have at home, legal and state complaints.

4c. Disney would have to allow access but could charge certain fees.

5. Yes, the points can be adjusted. All nights could be made the same and the points could be evened for the entire year. Unlikely to happen. What is more likely to happen is fairly minor adjustments. But what might be minor to me might not be to you. Say you bought just enough points for a week every year in a studio in adventure (low season). Even a 5-10% rise in the points for when you might go could rob you of a night here and there. That is why I'd allow at least a small cushion for anyone planning an exact number of points, esp if they were looking at less than a 2 BR, less than a full week and for a lower season. Once you get to enough points for a full week in a 2 BR for Dream season or higher for your preferred resort, I don't think it makes any difference. The people at most risk are those with very small contracts.

 

[Dean]

Not to offend....but if I had this many worries, I don't think I would step out of the house in the morning....

DVC carries similar risks as other timeshares, condo corporations etc etc.

Weigh these worries against reducing the worry over how I'll be saving for my next vacation! against the worries of chosing a vacation destination/resort that I have no experience with!

Replace that with the worries of:
- how many of the fabulous restaurants will I be able to fit into my next vacation
- how much more exciting will the fireworks be next year
- how can I fit it all in two weeks a year

That set aside...very interesting questions...no doubt that Disney does this because it makes them money. They wouldn't if it didn't. But if my family is happy and enjoys it every year. I'm ok.

I understand your thoughts and agree up to a point. However, many people need to ask the questions, get answers then move on. It doesn't mean they lie awake at night worrying about it every night, at least not for most. IMO, it's inappropriate as a prospective member to not at least consider these issues and many need to get answers that make them feel comfortable before proceeding.

 

[owtrbnks]

Thanks Dean! Your posts are always very logical and informative.

 

[jctwizzer]

Bottom Line: if the whole thing goes in the toilet next year, what have you lost? For most of us, it's $20,000 or less. Not too desirable, but most could handle it without much long range damage. Making up unlikely catastrophes and speculating about them makes as much sense as wondering when the aliens will be landing. Think about the worst case. If you can handle, it fine. If not, move along to something you can handle. Life's too short for anything else.....YMHO

 

[First Wave]

Before my post, a bit of an explanation. My main interest in this forum is renting - any purchace would be down the road. But I've still be studing the concept because what I do for a living - and for fun (yes, I'm a geek) - is analyze deals. So I've enjoyed reading all the great information you guys have posted, run the numbers every which way, etc. One thing I always include in analysis is "what can go wrong?" So below are a few scenarios for which I'm curious what the contractual and legal safeguards are. Just to be clear, these are unusual circumstances - not things I believe likely or am "worried" about. I hope people will consider this to be an interesting conversation, and not an attack on DVC. That said…

1) What if something horrible happens? There is negligence; lots of people die; there is a $100 million judgement; there is no insurance. Do DVC owners have any personally liability in these situations (i.e. can they come after the owners after they have exhausted all the assets of DVC?)

2) What if something bad happens (uninsured storm/mold/whatever damage perhaps)? The members vote for a huge one-time maintenance payment. I can't afford to pay. What happens?

3) What if somewhere down the road maintenance costs skyrocket, and the desirability of staying at DVC has plummets, to the point where the annual dues are more than anyone would pay to stay in the resorts. I don't want to keep paying my dues, nobody wants to buy my membership. Can I just walk away, or do I have a legal obligation to pay whatever I am charged?

4) What happens when Disney gets greedy? Somewhere down the road, Disney will stop selling new DVC units and thus be less inclined to treat existing members well. Also, as a corporation, there will be pressure to increase profits from DVC.

4a) I know the membership can fire Disney as the property managers, but what stops them from entering into, say, long-term high-cost contracts with another Disney subsidiary to provide maintenance?

4b) What influence can essentially-Disney-owned local government agencies (Reedy Creek, etc.) have over DVC - can they levy huge fees or anything?

4c) If there is friction between DVC members and Disney, what happens at a resort like VWL, which is hugely dependent upon Disney? For example, the resort is surrounded my Disney private property. Is Disney contractually required to allow access?

5) Can point costs be levelized? I've seen conflicting information on this one. I know the total yearly points can't really be changed. But could a decision be made to, say, charge the same number of points every night of the year - lowering costs to people who stay at peak times and weekends, but devastating the people who just bought enough points to stay off-peak Sun-Thurs

Much thanks to any information you guys have,
Sal

The answer is simple...Geek or no geek. The glass is either half full or half empty in each person's mind. Yours is FOR SURE half empty. I'd forget becoming a member of DVC, or owning a home, or getting married or having children.

For folks whose glass is half full, the Disney Vacation Club is the greatest thing to happen to us in regard to vacationing at Disney World. Or any of the other locations, for that matter.

Hope I don't sound too tough, but I just have a very difficult time with people who can't see the forest for the trees.

First Wave

 

[littlestar]

I'm the queen of worry and I've probably thought about some of these things that you mentioned before we bought. Two hurricanes did hit Vero Beach Resort (Jeanne and Frances), but Disney had enough insurance to where the members didn't have to pay out a special assessment (pretty amazing, I think).

Also, I really don't think the Disney company would want the bad publicity of treating a large group of people "wrong" - sticking it to the members or dealing unfairly. I figure they make more money on us by keeping us coming to their parks, eating in their restaurants, and making Disney Vacation Club something that my friends and family envy and would like to join themselves. I don't really think they want the future generation to think of them as "bad." They guard their brand pretty good I think. Let's face it, they are held to a higher standard. It's pretty much an American icon.

I think DVC will always be selling itself as long as Disney is in business. The resorts revert back to them in 2042/2054. How would they sell DVC again to the next generation (my children and grandchildren) if they had the reputation of cut throats the first time around?

I guess I just don't see the Disney company and DVC as being dumb enough to shoot itself in the foot. I think the brand is guarded better than that.

 

[bsusanmb]

Spiceycat, I didn't know that the CBR and Poly had mold problems!!! I stayed at AKL concierge this year and my room had such a moldy smell it made me very ill. Anyhow...

Gee, the sky could fall and the world could come to an end.....Since it hasn't yet, and I have been to WDW 30 times in the past 8 years, my money is on Disney. If I lose my money, hey, I lose it. I invested more in my kids' college educations and that's a huge risk in itself.

Maybe you could look at all the positive things that could happen in time with DVC members vs those who rent deluxe rooms. I'd like to see that one.

And you did all of this analysis since Nov 2005 when you joined this discussion group? WOW, you have a lot of time on your hands - no offense intended. I wish I had the time and the energy to play devil's advocate.

 

[salmoneous]

First of all, I'd like to thank everybody for their replies to this thread. And I mean that to everyone - Thank you. Most of the legal questions I was interested in have been answered, though I'll try to get back with a couple of follow up clarifications.

But before this thread gets completely out of hand, let me try and explain something. (I tried this before, but apparently my writing skills are lacking.)

These are not scenarios I am "worried" about.

Yes, I realize these scenarios are unlikely (though I do believe them more likely than space aliens landing).

The fact that I am asking in this thread about these scenarios does not mean I see the glass as half-full, nor does it mean I can't see the forest for the trees. I do realize there are *tons* of great things about DVC. I am aware of the positive thing that come through DVD ownership. I just didn't happen to list all of them here.

Yes, I've managed to find a couple of hours since November to do some analysis. (Does that really mean I have a lot of time on my hands?) My intention here was *not* to play devils advocate, to say bad things about DVC, or to comment one way or another as to the wisdom of making a purchase.

My purpose here was to do exactly what one of you suggested - to consider the worst case scenario. I do want to understand "what can happen if the whole thing goes into the toilet next year". JCTWIZZER suggest that the maximum loss is limited. Dean's answer suggests the legal liability could be a lot more (the obligation is not just the purchase price, but all future assessments.) Who is right? And are these bad questions to ask?

Thanks again,
Sal

 

[Fellowship9798]

The answer is simple...Geek or no geek. The glass is either half full or half empty in each person's mind. Yours is FOR SURE half empty. I'd forget becoming a member of DVC, or owning a home, or getting married or having children.

For folks whose glass is half full, the Disney Vacation Club is the greatest thing to happen to us in regard to vacationing at Disney World. Or any of the other locations, for that matter.

Hope I don't sound too tough, but I just have a very difficult time with people who can't see the forest for the trees.

First Wave

Wow. The OP said he was starting a conversation, not that he believed any of the things would actually happen. I think the questions, although they are extremely remote possibilities are certainly fair to ask and discuss without being dismissed a just someone being too negative.

The biggest thing on the list I wonder about was his point 4A, which referred to Disney divisions charging excessive amounts for services. Sure our dues legally can only cover the costs or running and maintaining the resorts, plus Disney gets a management fee of 2% or something like that.

But, part of running the resort includes transportation, provided by Walt Disney World Co. DVC is charged for transportation by the WDW Transportation division. Do they just charge DVC the bare cost of gas and maintenance for the busses and boats, plus labor for the drivers? I doubt it. I'm sure their bill to DVC includes some profit for the Disney Transportion group to show they are contributing to the bottom line of WDW. DVC won't mark up the bill to make any money, but The Walt Disney Company still could be profiting through whatever markup Transportation puts on the bill before DVC gets it. Is there any limit to what Transportation can charge DVC? The phone service is provided by Vista United (Disney's local phone company) which I doubt is a non-profit operation either. Are the security guards at the parking lots paid by DVC or by a general Disney Security division that sends a bill to DVC?

There are so many divisions of Disney that are needed to run the resorts other than DVC itself if they wanted to, what could stop The Walt Disney Company from instructing it's divisions to charge DVC resorts 15% more each and every year from now until the DVC contracts run out? Theoretically that could keep our dues under the 15% annual increase cap and DVC wouldn't be making a penny, but it would provide ever increasing profits for WDW from DVC members.

Do I think that will happen? Of course not, but it is certainly fair to ask if it is theoretically possible. It's probably illegal too, but in big business where there's a will, there's a way to make it happen. When I was a cast member at Epcot, I remember having a discussion with my manager about whether getting some new signs made for the Refreshment Port was a good idea for directing people where to line up. His comment was that getting a couple little signs made, approved by Imagineering for use in the park, and then installed would cost the Canada foods group a fortune. His almost exact words were "You wouldn't believe what Disney charges Disney for things like that".

What if Comcast or some other company makes another bid for Disney and sells off the parks? It nearly happened in the 80's. What if a new owner of WDW doesn't want to be in the timeshare business for 50 years before getting the resorts back and decides it would rather drive members out by pushing dues up so high that people default? And don't start with the "we're Disney's best customers, nobody would do that" stuff. Who knows what some other corporation's business strategy may be?

Again, it's just a conversation and I don't believe it would ever happen (I certainly hope not since I plan to enjoy my membership until it runs out). But what's wrong with fully understanding what the possibilities are, or at least discussing them for fun? That's partially what places like the DIS boards are for, aren't they?

 

[greenban]

The answer is simple...Geek or no geek. The glass is either half full or half empty in each person's mind. Yours is FOR SURE half empty. I'd forget becoming a member of DVC, or owning a home, or getting married or having children.

For folks whose glass is half full, the Disney Vacation Club is the greatest thing to happen to us in regard to vacationing at Disney World. Or any of the other locations, for that matter.

Hope I don't sound too tough, but I just have a very difficult time with people who can't see the forest for the trees.

First Wave

I'd have to disagree. My glass is definately three-quarters empty, I'm happiest when I'm complaining, and I love Disney and my DVC. (Think of a certain Dwarf.......eh Grumpy?)

Some people are right handed, some are left handed, they can all still enjoy Disney!

-Tony

P.S. I'm married, Have 3 Kids, Own a home and love trees (in a forest or singularily, yet I'm still a worrier and worst-case-scenario planner....Y2K anyone? )

 

[Dean]

My purpose here was to do exactly what one of you suggested - to consider the worst case scenario. I do want to understand "what can happen if the whole thing goes into the toilet next year". JCTWIZZER suggest that the maximum loss is limited. Dean's answer suggests the legal liability could be a lot more (the obligation is not just the purchase price, but all future assessments.) Who is right? And are these bad questions to ask?

Thanks again,
Sal

Only a court can say for certain. But having seen other timeshares with special assessments including Marriott, I am confident there are risks.

 

[jctwizzer]

Only a court can say for certain. But having seen other timeshares with special assessments including Marriott, I am confident there are risks.

Admittedly I haven't read the fine print, but seems to me that paying a special assessment, or even annual dues, is discretionary. You have the option of paying; selling; or walking away from the whole thing. All the timeshares I'm familiar with report a certain percentage of owners who fail to pay annual dues; requiring the management to "foreclose" to recoup. Which leads me to believe that walking away without further liability is an option. That's drastic, but in some cases it could be the best alternative.

 

[mydogdrew]

Admittedly I haven't read the fine print, but seems to me that paying a special assessment, or even annual dues, is discretionary. You have the option of paying; selling; or walking away from the whole thing. All the timeshares I'm familiar with report a certain percentage of owners who fail to pay annual dues; requiring the management to "foreclose" to recoup. Which leads me to believe that walking away without further liability is an option. That's drastic, but in some cases it could be the best alternative.

While this may be a common outcome in a timeshare foreclosure, I would be uncomfortable suggesting that there is anything discretionary about assessments or dues. Disney would likely have legal recourse - the question is would they pursue this.
The long-term risk of annual dues outpacing the underlying rental rate is a valid concern however.

 

[jctwizzer]

While this may be a common outcome in a timeshare foreclosure, I would be uncomfortable suggesting that there is anything discretionary about assessments or dues. Disney would likely have legal recourse - the question is would they pursue thisQUOTE

I agree. the developer would "reposses" the contract to settle the debt...and then sell it again in the resale market...It's done all the time. My point, going back to the original question about risk. is that you can walk away without further liability....you loose the timeshare, but at that point it may be worth it.