Would you join a lawsuit against DVC to stop/revert the 2020 reallocation?

[Dean]

Regarding misleading practices -- if it actually came to a lawsuit, that's the beauty of discovery in America. You'd be amazed at the stuff that is discovered in e-mails and sales memos.

The courts are often nuts themselves but unless it goes to trial, the contractual and state statues are what I'd see as the governing force.

I think most of us have a different definition of nuance. The agent for disney is just that, Disney’s agent/ representative. You seem to be belittling their role and persuasiveness in this process. I do not believe it is a small thing or they did not know that in their interpretation of the contract, they could raise the total points in individual unit catagories. Imagine saying to a customer, Mr. and Mrs Middle class buyer, the $$ you are scraping together for your studio 5 nights a year, may only be enough for 2 nights down the road. Think that honesty would have changed some minds. They new what they were doing and manipulated people in their sales presentation to show the peices of the pie they wanted you to see. That may be alright with some, but not me. To assume that the well trained disney salespeople are innocent in this is naïve.

IMO truths that are intended to be what the buyer wants to hear are usually reasonable. For example, if they say you can reserve subject to availability at 7 months out, that is accurate but they may say it in a way that makes you think it's easy when it's not. To me this is a contractual and legal black and white issue, basically if it's legal it's ethical. I know some disagree, they should muster their legal dollars to prove differently. One thing to keep in mind is that you sign a contract that says verbal representations are not binding. It's no different than buying a car and the salesperson tells you about people getting 40 mpg but you only get 30 and the car is rated at 37.

 

[miTnosnhoJ]

I’m sure part of the problem is talking to someone “very high up”.

Think about where you work. How well does senior management understand what you do or why? In most places, they know almost nothing.

If Y had answers to all your questions, I would find it suspicious.

The person who knows is the one who did the calculations. That’s the person we need to hear from.

I find this difficult to believe for one reason. The VGF Condominium Document explicitly added their ability to increase the lockoff premium up to 20% per year with no member vote required. And with no offsetting decreases elsewhere. This is not a low level person having a spreadsheet orgasm. This is a strategy that was put in place in 2013. This was done at the highest levels with some very high priced legal advice. It is the Chekhov Gun rule in action. If you hang a gun in the wall in Act I, It must be fired by Act III.

 

[Madame]

This is not a low level person having a spreadsheet orgasm.

You win the Dis today!

 

[mustinjourney]

The courts are often nuts themselves but unless it goes to trial, the contractual and state statues are what I'd see as the governing force.

IMO truths that are intended to be what the buyer wants to hear are usually reasonable. For example, if they say you can reserve subject to availability at 7 months out, that is accurate but they may say it in a way that makes you think it's easy when it's not. To me this is a contractual and legal black and white issue, basically if it's legal it's ethical. I know some disagree, they should muster their legal dollars to prove differently. One thing to keep in mind is that you sign a contract that says verbal representations are not binding. It's no different than buying a car and the salesperson tells you about people getting 40 mpg but you only get 30 and the car is rated at 37.

Hilton timeshares were forced to remove language that limited it the four corners of the document based upon their salesmen’s Mischaracterizations. So just bc a document limits your rights, that doesn’t mean it will. Especially with consumer protection situations.

 

[Dean]

Hilton timeshares were forced to remove language that limited it the four corners of the document based upon their salesmen’s Mischaracterizations. So just bc a document limits your rights, that doesn’t mean it will. Especially with consumer protection situations.

Then take them to court.

 

[vampiroth]

She told me she'll take some time to gather all the answers I need and they'll call me back, probably in a week time. She also told me she's quite a senior manager and already spent a lot of time with me, and she's happy about it because they care about the members but she would be also be looking at finding a conclusion to this (I think this means next call will be the last one).

I have to say I actually appreciate the time they're spending with me, but I'm not happy with the replies I got until now.

Zavandor, I do not usually post here. However I am a DVC owner. I also own a significant amount of real estate used as rental property in my state. After the housing market collapse in 2008 I had extensive time with an amazing legal team. One of my companies keeps the firm to deal with the legal issues we face renting our properties. They represent a different major time share competitior as well (it was a portfolio highlight)

I had one attorny review the document you referenced that the DVD senior manager told you was not a legal document. "paragraph 10.6.3 of the condominium declaration" From our conversation that document is absolutely legally binding and per your conversation with them she was surprised Disney is speaking with you regarding the legality of that document without an attorney. She did clarify that each resort most likely has different rules and for your potential case result good vary per resort.

I did not have her review anything in the document other than whether it was legally binding, and her confirmation was that the document is aboslutely legally binding.

 

[RobDoc]

I find this difficult to believe for one reason. The VGF Condominium Document explicitly added their ability to increase the lockoff premium up to 20% per year with no member vote required. And with no offsetting decreases elsewhere. This is not a low level person having a spreadsheet orgasm. This is a strategy that was put in place in 2013. This was done at the highest levels with some very high priced legal advice. It is the Chekhov Gun rule in action. If you hang a gun in the wall in Act I, It must be fired by Act III.

The 20% allowance has been in place since the beginning of DVC. It was NOT "put in place in 2013".

Here is the 05/93 POS - Exhibit "I" To Declaration of Condominium , Disney Vacation Club Membership Agreement, Section II Operation of the Club, under 2.3 Vacation Point Reservation System.

 

[skier_pete]

I am not trying to justify DVC's concept of higher demand, but just attempting to identify what it likely is. The concept that most of us have for distinguishing "demand" is how many more members actually want 2BRs as opposed to 1BRs, but for determining that kind of demand, one cannot really do a count using the reservation system because you can only see that 1BRs remain available longer and are eventually filled. What you cannot see is the likely large number of members who go online because they want a 2BR but find they are no longer available and decide not to reserve at all or reserve a 1BR.

holy cow. I never understood what the counter argument could be until your post just now. So in the event, let's say 49 2BRs get booked, they might be just looking at the end result and see that 197 studios get booked, 230 1BRs are booked, with only 49 2BRs being booked.

Wow. If that is what they're doing then someone needs to be fired and taught the difference between demand and people taking what is leftover.

Well, this is slightly different that what I proposed. I said they might look at "demand" as the total number of unoccupied rooms across the entire system. These rooms end up being mostly at SSR and OKW, with a few across the other resorts. Since it's starting to look like availability at SSR might track that 2BD are around at this location longer than 1BD....perhaps they are seeing that the entire system (again, mostly at SSR) has 10,000 unoccupied 2-BD nights in a year, and 7,000 unoccupied 1-BD nights. The fact there are more unoccupied 2BD than 1BD could make the logic to try and drive more people to 2BD across the entire system. Not saying this is any more or less stupid than @drusba's theory - but I agree that either is possible, and both are pretty inaccurate measures.

I think that, whether this is legal or not or allowed via the contracts or not, Disney would be smart to get ahead of this before it becomes a common talking point about DVC in the timeshare community. Right now they still have time to fix it and say whoops we made a mistake we'll go with the 2019 charts again, sorry about that. But if this goes on longer, the talk when people discuss timeshares will go "DVC? Oh, they do that point creep stuff, so not worth it, you have to keep buying more points to reserve the same thing." Disney does not want to get a reputation like that, or at least I would hope they wouldn't.

Disney, get out in front of this while it is still small and cut it off at the pass!

Disney will only do something about it if it actually starts to hurt sales...I am not sure they will respond to this.

 

[skier_pete]

Zavandor, I do not usually post here. However I am a DVC owner. I also own a significant amount of real estate used as rental property in my state. After the housing market collapse in 2008 I had extensive time with an amazing legal team. One of my companies keeps the firm to deal with the legal issues we face renting our properties. They represent a different major time share competitior as well (it was a portfolio highlight)

I had one attorny review the document you referenced that the DVD senior manager told you was not a legal document. "paragraph 10.6.3 of the condominium declaration" From our conversation that document is absolutely legally binding and per your conversation with them she was surprised Disney is speaking with you regarding the legality of that document without an attorney. She did clarify that each resort most likely has different rules and for your potential case result good vary per resort.

I did not have her review anything in the document other than whether it was legally binding, and her confirmation was that the document is aboslutely legally binding.

The further we go down this rabbit hole - the more it feels like Disney is doing something that is if not illegal, at least on the margins of legality. How do we get an actual lawyer to look this over and see if they think there's a case to be made. We've established maybe a half dozen things we "think" might be shady - but none of us really know enough to know if we have a shot at taking this to any sort of arbitrator. (I am of belief a lawsuit is probably not worth the cost.)

The problem here is the cost to any of us individually of what they did is at best a few hundred dollars a year - hardly justifyable to spend tens of thousands in legal fees.

 

[miTnosnhoJ]

The 20% allowance has been in place since the beginning of DVC. It was NOT "put in place in 2013".

Here is the 05/93 POS - Exhibit "I" To Declaration of Condominium , Disney Vacation Club Membership Agreement, Section II Operation of the Club, under 2.3 Vacation Point Reservation System.

Now see the 2013 language...

 

[Grumpy6264]

Disney Selling Point: you are locking in a lifetime of vacations at today’s prices.
Fact: This is a true statement if two conditions are true. 1] you buy enough points for a 2BR. 2) you only use your points to stay in 2BRs. Your price for studios and 1BRs is not guaranteed to stay at today’s prices and can in fact go up 20% per year without a member vote. And without a corresponding decrease elsewhere on the points chart.

I’m sure that could be word smithed to be more on point, but that is the idea.

I don't know if you can say that for any condition, but studios and 1BRs are certainly affected the most. I think that resorts with dedicated studios and 1BRs are somewhat protected due to the fact that those point changes need to be offset by changes elsewhere in the resort, but resorts with only lock-offs you are spot on.

This is a negative side effect of having a flexible system like DVC. The bigger DVC gets the more frequent and extreme these events are going to be.

It just would be nice to get real data justifying these changes.

Think about where you work. How well does senior management understand what you do or why? In most places, they know almost nothing.

I am amazed every day about how little the leadership at my company understands our processes and workflows.

 

[DaveNan]

Now see the 2013 language...

Interesting point. "Any excess availability shall be subject to the breakage period..."
I own at the resorts, BWV, SSR, and AKV, so I can only see three of the budgets for 2019. The budget is subject to some rules and maximums around how much breakage income comes back to annual budget as a credit, ie - Disney making money off the points they generate and they "give it back to us".

From the budget foot notes "Breakage Income - As stated in the Condominium Documents, Disney Vacation Club Management, LLC (“DVCMC”) rents, during the Breakage Period, certain accommodations that have not been reserved by Members. The Association is entitled to receive, as breakage income, the proceeds of such rentals not to exceed 2.5 percent of the aggregate of the Condominium Operating Budget (total operating expenses less the sum of interest income and Member late fees and interest) and Capital Reserve Budget in each calendar year."

For all three resort with the budget in place for 2019, the breakage income is estimated to be exactly 2.5 percent of Condominium Operating Budget (total operating expenses less the sum of interest income and Member late fees and interest and they even subtracted parking revenue received) and Capital Reserve Budget in each calendar year to the dollar!!! This means with the new 2020 points charts, because of the increased lock-off premium, will give them even more "breakage revenue", but because they are already "giving" us back the maximum amount required per the rules, that increased breakage income will go to Disney.

For SSR at a 75% LO as a studio and 1 BR, at $30 a point, the 2019 LO premium would generate an estimated 21.4 million dollars. With the 2020 chart that jumps another 13.9 million to 35.3 million. SSR has 14,029,319 points sold. With the 75% of LO as Studio and 1 BR it would take 15,207,242 to fill every night. (or Disney can now sell for cash 1.2 million points every year and still have rooms available to meet the requirements of the 14M sold points)

But nobody worry, Disney gives us back exactly $1,830,820 of that 35 million as breakage income. That other $33M, well I guess they keep that as part of the POS.

And don't forget the extra costs they have to handle more housekeeping, reservations, front desk maintenance and security.
But wait..
1. We pay those costs in our MF's, not Disney
2. for 2019 the total cost at SSR (not extra costs because of the burden of lock-off) is 35 million for front desk, housekeeping, maintenance, reservations and security. again directly from the 2018 budget report

If that extra 33M came our way, and our MF's were $2.35 less per point, maybe we would not be so upset.

Maybe the 6.5 Million we pay for "management" in 2019 in the budget are the folks who came up with the "increase the lock-off premium rip-off". If so, can we cut their pay?

I have a hard time believing the lock-off premium was increased to balance demand, with Disney standing to gain this kind of money and availability being so limited at 2 months.

 

[DVC92]

I find this difficult to believe for one reason. The VGF Condominium Document explicitly added their ability to increase the lockoff premium up to 20% per year with no member vote required. And with no offsetting decreases elsewhere. This is not a low level person having a spreadsheet orgasm. This is a strategy that was put in place in 2013. This was done at the highest levels with some very high priced legal advice. It is the Chekhov Gun rule in action. If you hang a gun in the wall in Act I, It must be fired by Act III.

It still has to be in the best interests of the members. Clearly, it wasn't. Particularly raising all standard 1BRs 21 points per week. Effectively, an additional 21 points is valued over $5,000 with the price increase.

 

[Wakey]

Interesting point. "Any excess availability shall be subject to the breakage period..."
I own at the resorts, BWV, SSR, and AKV, so I can only see three of the budgets for 2019. The budget is subject to some rules and maximums around how much breakage income comes back to annual budget as a credit, ie - Disney making money off the points they generate and they "give it back to us".

From the budget foot notes "Breakage Income - As stated in the Condominium Documents, Disney Vacation Club Management, LLC (“DVCMC”) rents, during the Breakage Period, certain accommodations that have not been reserved by Members. The Association is entitled to receive, as breakage income, the proceeds of such rentals not to exceed 2.5 percent of the aggregate of the Condominium Operating Budget (total operating expenses less the sum of interest income and Member late fees and interest) and Capital Reserve Budget in each calendar year."

For all three resort with the budget in place for 2019, the breakage income is estimated to be exactly 2.5 percent of Condominium Operating Budget (total operating expenses less the sum of interest income and Member late fees and interest and they even subtracted parking revenue received) and Capital Reserve Budget in each calendar year to the dollar!!! This means with the new 2020 points charts, because of the increased lock-off premium, will give them even more "breakage revenue", but because they are already "giving" us back the maximum amount required per the rules, that increased breakage income will go to Disney.

For SSR at a 75% LO as a studio and 1 BR, at $30 a point, the 2019 LO premium would generate an estimated 21.4 million dollars. With the 2020 chart that jumps another 13.9 million to 35.3 million. SSR has 14,029,319 points sold. With the 75% of LO as Studio and 1 BR it would take 15,207,242 to fill every night. (or Disney can now sell for cash 1.2 million points every year and still have rooms available to meet the requirements of the 14M sold points)

But nobody worry, Disney gives us back exactly $1,830,820 of that 35 million as breakage income. That other $33M, well I guess they keep that as part of the POS.

And don't forget the extra costs they have to handle more housekeeping, reservations, front desk maintenance and security.
But wait..
1. We pay those costs in our MF's, not Disney
2. for 2019 the total cost at SSR (not extra costs because of the burden of lock-off) is 35 million for front desk, housekeeping, maintenance, reservations and security. again directly from the 2018 budget report

If that extra 33M came our way, and our MF's were $2.35 less per point, maybe we would not be so upset.

Maybe the 6.5 Million we pay for "management" in 2019 in the budget are the folks who came up with the "increase the lock-off premium rip-off". If so, can we cut their pay?

I have a hard time believing the lock-off premium was increased to balance demand, with Disney standing to gain this kind of money and availability being so limited at 2 months.

Reading this post makes my blood boil. Interesting summary DaveNan , thanks.

 

[zavandor]

I had one attorny review the document you referenced that the DVD senior manager told you was not a legal document. "paragraph 10.6.3 of the condominium declaration" From our conversation that document is absolutely legally binding and per your conversation with them she was surprised Disney is speaking with you regarding the legality of that document without an attorney. She did clarify that each resort most likely has different rules and for your potential case result good vary per resort.

I did not have her review anything in the document other than whether it was legally binding, and her confirmation was that the document is aboslutely legally binding.

Thank you for taking the time doing this, really appreciated. However I have to clarify that the document she says is not legally binding is the "Product Understanding Document" that they make buyers sign and is a summary of the POS. One of the points I made to her was that document changed over the years to reflect their different interpretations of the POS without changing the POS itself.
Paragraph 10.6.3 of the condominium declaration is legally binding but she couldn't answer about why it seems in clear contradiction with the reallocations they've done since 2013 and she'll come back to me about it.

By the way, today I found this in Florida statute:
The timeshare instrument must also provide for the application of any insurance proceeds arising from a casualty to either the replacement or acquisition of additional similar accommodations or facilities or to the removal of purchasers from the multisite timeshare plan so that purchasers will not be competing for available accommodations on a greater than one-to-one use right to use night requirement ratio.

Paragraph 10.6.3 has been written because of this. Another proof it's legally binding. And that paragraph clearly states that if a unit and all its owners are removed from the system because of destructive damage, then the rest of the resort will be in balance according to the one-to-one rule. This would prevent reallocation of points cross units.
We'll see what she replies to that, maybe that it only applies to the first year?



May I ask you a further favor and ask her one more thing?
The Florida statute says that the one-to-one rule applies to each timeshare unit, not the whole resort.
The definition of a timeshare unit is:
“Timeshare unit” means an accommodation of a timeshare plan which is divided into timeshare periods. Any timeshare unit in which a door or doors connecting two or more separate rooms are capable of being locked to create two or more private dwellings shall only constitute one timeshare unit for purposes of this chapter, unless the timeshare instrument provides that timeshare interests may be separately conveyed in such locked-off portions. (my emphasis)
My interpretation is that clearly a 3BR villa is a single timeshare unit. While there are doors separating private dwellings, those cannot be booked independently and you never find in the POS a reference to "the third bedroom of a grand villa".
The same is true for dedicated studios, 1BR and 2BR.
My doubt is for the 2BR lockoff. They can be locked to form two separated Vacation Homes (like Disney calls them). The issue revolves around what conveyed means.
I've looked online but I'm not a lawyer. In the definitions of Conveying in legal terms I've found, it means: granting someone a right on something. So conveying a house means granting ownership of that house.
Can we say that the POS for SSR "conveys" also studios and 1BR?
I think it does because:
- the POS clearly defines the studios and 1BR as Vacation Homes, with no difference of definition from the other room types
- it says Vacation Homes will be numbered and portions of a lockoff have a number
- it explicitly says that a 2BR Vacation Home can be locked off into separate studios and 1BR Vacation Homes.
- there is a rule in the Membership agreement saying that owners will always be able to book at least one night in a studio or a 1BR for XX points
- there is a description of a maximum reallocation that could level the cost of studios and 1BR up to a certain maximum
- DVD sells fixed weeks for studios and 1BR also at resorts that do not have dedicated room (this is my strongest argument)
For all those reasons I think the POS conveys also the locked off rooms, because it grants rights on them to owners. For this reason they have to be considered as timeshare units and so the one-to-one rule applies to them as well.

However, others disagree with me, I really would like the opinion of a lawyer who specializes on Timeshares.
Thank a lot if you could do this!

 

[zavandor]

Interesting point. "Any excess availability shall be subject to the breakage period..."
I own at the resorts, BWV, SSR, and AKV, so I can only see three of the budgets for 2019. The budget is subject to some rules and maximums around how much breakage income comes back to annual budget as a credit, ie - Disney making money off the points they generate and they "give it back to us".

From the budget foot notes "Breakage Income - As stated in the Condominium Documents, Disney Vacation Club Management, LLC (“DVCMC”) rents, during the Breakage Period, certain accommodations that have not been reserved by Members. The Association is entitled to receive, as breakage income, the proceeds of such rentals not to exceed 2.5 percent of the aggregate of the Condominium Operating Budget (total operating expenses less the sum of interest income and Member late fees and interest) and Capital Reserve Budget in each calendar year."

For all three resort with the budget in place for 2019, the breakage income is estimated to be exactly 2.5 percent of Condominium Operating Budget (total operating expenses less the sum of interest income and Member late fees and interest and they even subtracted parking revenue received) and Capital Reserve Budget in each calendar year to the dollar!!! This means with the new 2020 points charts, because of the increased lock-off premium, will give them even more "breakage revenue", but because they are already "giving" us back the maximum amount required per the rules, that increased breakage income will go to Disney.

For SSR at a 75% LO as a studio and 1 BR, at $30 a point, the 2019 LO premium would generate an estimated 21.4 million dollars. With the 2020 chart that jumps another 13.9 million to 35.3 million. SSR has 14,029,319 points sold. With the 75% of LO as Studio and 1 BR it would take 15,207,242 to fill every night. (or Disney can now sell for cash 1.2 million points every year and still have rooms available to meet the requirements of the 14M sold points)

But nobody worry, Disney gives us back exactly $1,830,820 of that 35 million as breakage income. That other $33M, well I guess they keep that as part of the POS.

And don't forget the extra costs they have to handle more housekeeping, reservations, front desk maintenance and security.
But wait..
1. We pay those costs in our MF's, not Disney
2. for 2019 the total cost at SSR (not extra costs because of the burden of lock-off) is 35 million for front desk, housekeeping, maintenance, reservations and security. again directly from the 2018 budget report

If that extra 33M came our way, and our MF's were $2.35 less per point, maybe we would not be so upset.

Maybe the 6.5 Million we pay for "management" in 2019 in the budget are the folks who came up with the "increase the lock-off premium rip-off". If so, can we cut their pay?

I have a hard time believing the lock-off premium was increased to balance demand, with Disney standing to gain this kind of money and availability being so limited at 2 months.

Wow, we all knew the lockoff premium increase was going to benefit Disney, but looking at the actual numbers it is shocking. 13.9 million more in breakage revenue is HUGE.

And by the way, Happy Lockoff Premium Day everyone!
Today is the first day members will book rooms with the lockoff premium increase.

 

[Dean]

Now see the 2013 language...

I don't see any differences there from a reality or process standpoint. The "lockoff premium" and all change options were already in place this just labeled it.

 

[Bing Showei]

Reading this post makes my blood boil. Interesting summary DaveNan , thanks.

I agree that it’s eye opening, but to Dean’s point, optics aside, if Disney can prove that the reallocation was designed to better the greater membership (more specifically to address demand), the financial windfall (Can $33M even be called that?) would would be immaterial.

Absent the data, I’m not sure how easy that would be to prove this is a money grab.

 

[OKW Lover]

if Disney can prove that the reallocation was designed to better the greater membership (more specifically to address demand), the financial windfall (Can $33M even be called that?) would would be immaterial.

Does Disney need to prove that? Or do the plaintiffs need to prove that it wasn't?

 

[Bing Showei]

Does Disney need to prove that? Or do the plaintiffs need to prove that it wasn't?

As a company that built its reputation on its good name, do you see a reason why Disney wouldn’t want to absent a litigious obligation to?