worst case scenario - can we end up with an almost open-ended liability?

[Tony]

Appreciate this might touch a nerve, but the current situation has left me pondering, do DVC owners run the risk of being left saddled by ever-increasing annual dues - potentially in a position where there's no ability to use the property or rent it on - until the contract expires?

Am sure this is detailed in the terms which are tucked away in a cupboard somewhere. I never thought this was a one-way bet, but with 40 years left on my minimal contract, even at just 3% inflation, that's $75k worth of fees we might be on the hook for between now and 2060.

I'd love to think this isn't the end of the parks, but ultimately I was always wary of timeshare & thought the DVC proposition was infallible...

 

[tjkraz]

What set of circumstances does your crystal ball suggest would leave you “in a position where there’s no ability to use the property or rent it”?

I mean, we could brainstorm a bunch of really wild ideas (recurring pandemics, dirty bomb, massive earthquake that drops Florida into the sea, etc.) But what do you realistically believe COULD happen that would permanently obliterate the value of a Walt Disney World vacation?

 

[Sandisw]

The POS requires resorts to open back up as soon as they can with the health and safety in mind. Emergency powers gave them the right to decide to close due to a stare of emergency

Once government orders are lifted and there seems to be the ability to open, even with conditions, DVCM would need to do it in a time that is reasonable,

Nothing to do with parks and those opening, as we are not guaranteed those.

They can’t keep resorts close just for the sake of it. So, no, we won’t be paying dues without having the resorts open to use them.

 

[CarolMN]

The POS requires resorts to open back up as soon as they can with the health and safety in mind. Emergency powers gave them the right to decide to close due to a stare of emergency

Once government orders are lifted and there seems to be the ability to open, even with conditions, DVCM would need to do it in a time that is reasonable,

Nothing to do with parks and those opening, as we are guaranteed those.

They can’t keep resorts close just for the sake of it. So, no, we won’t be paying dues without having the resorts open to use them.

You meant we are NOT guaranteed the theme parks, right?

 

[GGGT]

.................................................. potentially in a position where there's no ability to use the property or rent it on - until the contract expires?...........

If something this catastrophic occurred and there was definitive proof that there would never be any use again, everyone would just stop paying their dues. Obviously, a prorated amount of the purchase price would be a loss, but people wouldn't continue paying dues under these circumstances.

 

[Sandisw]

You meant we are NOT guaranteed the theme parks, right?

Yes. I’ll fix!

 

[itutorfortravel]

Let’s say Disney goes bankrupt. I mean, they can’t stay closed indefinitely. Even if another company buys them, what do they owe dvc members in that case?

 

[Sandisw]

Let’s say Disney goes bankrupt. I mean, they can’t stay closed indefinitely. Even if another company buys them, what do they owe dvc members in that case?

The DVC resort building belongs to us. We have a ground lease thst allows use until expiration.

Owners would need to hire a new management company if DVCM is no longer a company.

Basically, we wpupd continue to be eligible for using our home resorts, regardless of the state of TWDC.

 

[mentos]

Worst case: someone nukes a resort, nuclear disaster and acts of war not covered by insurance, owners are technically on the hook to rebuild.

We would walk away and have our interests foreclosed upon. Would foreclosure even happen? There would be no point.

Worst financial scenario: TWDC bankruptcy, our ground lease would be subject to federal bankruptcy court proceedings.

::::

 

[Tony]

Thanks for indulging me. Just struck me after reading a Bloomberg article on the financial health of Disney, plus the thoughts on how any reopening may look (which still seems borderline to be honest - they need a load of people through those gates to break even at the parks) and another piece on the risk of the virus mutating.

If the freeholder goes bankrupt, would whoever bought out the DVC components see owners as a free meal ticket for the next 30-40 years, because all of a sudden buying a tower block between a swamp and a shuttered theme park would start to look quite attractive? I suspect we can't just stop paying the dues, either, (effectively returning the keys) because we're liable as leaseholders so the new freeholder just pursues us through the courts to recover their money???

Apologies if that's an ugly prospect.

 

[mentos]

? I suspect we can't just stop paying the dues, either, (effectively returning the keys) because we're liable as leaseholders so the new freeholder just pursues us through the courts to recover their money???

Apologies if that's an ugly prospect.

Yes, you can stop paying dues, you cannot be pursued for a deficiency judgement in Florida for a timeshare property, see below:

In Florida...state law provides for the nonjudicial foreclosure of mortgages and assessment liens when it comes to timeshare properties. (Fla. Stat. Ann. § 721.855 and § 721.856.)

Residential properties are judicial and can result in deficiency judgements, but the maximum recourse the owner’s association has against a non-paying owner is only foreclosure of the property.

California (VGC) is a one-action state and the plaintiff must choose between a streamlined non-judicial process or a judicial process (prolonged). A deficiency judgement is only possible in the latter.

 

[Tony]

Thank you mentos for that. Makes me feel a little more reassured.

 

[Maistre Gracey]

I’m still trying to figure out exactly what that means.

 

[mentos]

I’m still trying to figure out exactly what that means.

Basically, the only way a person or company can TAKE money from you (wage garnishment, seize bank accounts, put liens on your property) is through open court (with a judge). This is a judicial proceeding.

A non-judicial proceeding happens outside of court, and is limited in what it can do. One of the allowed items is foreclosure of real property and transferring the interest in said property.

Timeshares in FL are limited to non-judicial proceedings, meaning they can NEVER take any other money/property from you, because they can’t even get into the door of the courtroom to begin with.

All they can do is take whatever timeshare ownership you had.

 

[CanadaDisney05]

All of the above. But in addition, don't forget about Time Value of Money. If your dues go up by 2 to 3% annually due to inflation (they actually tend to go up by more than that), then your income and the cost of everything will also go up by about the same. Even though your MF in 30 years will seem like a really large number, it won't feel like much of a difference than it does now because your earnings went up proportionately.

 

[Tony]

...it won't feel like much of a difference than it does now because your earnings went up proportionately.

No, but at least to me it would feel punitive if I was having to pay anything at all for something that had no value. And if a new owner of the freehold bought this purely as a financial play, those annual fees would increase at the absolute maximum allowable rate. We've always got the opportunity at present to sell points to more than cover the dues, but that's only possible because there's historically been no shortage of willing buyers.

What's the resale market doing now? Are DVC dropping the ROFR levels?

 

[CanadaDisney05]

No, but at least to me it would feel punitive if I was having to pay anything at all for something that had no value. And if a new owner of the freehold bought this purely as a financial play, those annual fees would increase at the absolute maximum allowable rate. We've always got the opportunity at present to sell points to more than cover the dues, but that's only possible because there's historically been no shortage of willing buyers.

What's the resale market doing now? Are DVC dropping the ROFR levels?

I agree it would suck to pay for something you had no use for. My point was that you can't extrapolate the maintenance fees by 2-3% annually without discounting them by that amount too.

Lets say your maintenance fees are $1,000 today and go up 2% annually

Year 1 = $1,000
Year 2 = $1,020
Year 3 = $1,040

Total Maintenance Fees = $3,060 in absolute terms. But in reality, the $1,040 you paid in year 3 is equivalent to $1,000 today because your income went up by 2% annually as well. It's really going to feel like you paid $3,000 over the three years because your additional income will cover the extra $60.

 

[mentos]

I agree it would suck to pay for something you had no use for. My point was that you can't extrapolate the maintenance fees by 2-3% annually without discounting them by that amount too.

Lets say your maintenance fees are $1,000 today and go up 2% annually

Year 1 = $1,000
Year 2 = $1,020
Year 3 = $1,040

Total Maintenance Fees = $3,060 in absolute terms. But in reality, the $1,040 you paid in year 3 is equivalent to $1,000 today because your income went up by 2% annually as well. It's really going to feel like you paid $3,000 over the three years because your additional income will cover the extra $60.

Ah I love it, calculating the NPV is essential when dealing with assets requiring maintenance over 20, 30, and 40 years. It's an essential part of the due diligence every DVC buyer needs to do before buying.

 

[mentos]

No, but at least to me it would feel punitive if I was having to pay anything at all for something that had no value. And if a new owner of the freehold bought this purely as a financial play, those annual fees would increase at the absolute maximum allowable rate. We've always got the opportunity at present to sell points to more than cover the dues, but that's only possible because there's historically been no shortage of willing buyers.

What's the resale market doing now? Are DVC dropping the ROFR levels?

But the reality is, if a ground lease were assumed by another entity, it would not be in their best interests to jack up the fees (there are other legal considerations/constraints that I wont' dive into).

The only clear example in recent memory was a case involving DRI assessing owners for storm damage at a timeshare in Hawaii, and the ensuing lawsuit was settled out of court.

 

[Tony]

Ah I love it, calculating the NPV is essential when dealing with assets requiring maintenance over 20, 30, and 40 years. It's an essential part of the due diligence every DVC buyer needs to do before buying.

But you only have to be 1% out in that assessment to make a significant difference over 40 years! And it's further complicated by the fact I don't live in the US so am subject to other economic disconnects.