Disney has begun using a nonjudicial process to foreclose on Disney Vacation Club deeds that have unpaid assessments or mortgages. The new process, called a Trustee Foreclosure, bypasses the judicial system and is conducted by a trustee appointed by Disney.
After the housing bubble burst in 2008, the State of Florida was faced with huge numbers of foreclosures and lengthy delays in processing those foreclosures. The Florida Legislature streamlined the foreclosure process and in 2010 it amended Chapter 721, Sections 855 and 856 of the Florida Statutes to allow timeshares to use a nonjudicial process, also called a Trustee Foreclosure, to foreclose on deeds that were in default of their assessments or mortgages.
At the 2011 Annual Meeting the Disney Vacation Club Board amended the master declarations of the Florida Disney Vacation Club resorts to reflect the new law. Also, in 2011, Disney modified its Short Form Mortgage Agreement to permit Trustee Foreclosures if a DVC owner fails to make timely payment on his or her mortgage.
Despite having the authority to use Trustee foreclosures since 2011, Disney has not taken that approach until recently. In November and December 2015, 43 DVC deeds were foreclosed via the Trustee Foreclosure process, 33 deeds for unpaid assessments and 10 deeds for unpaid mortgage payments.
Trustee foreclosures are similar to judicial foreclosures in that the deeds are sold at public auctions to satisfy the liens against the deeds. As in the case of a judicial foreclosure, legal notices of the Trustee Foreclosure proceeding and auction are mailed to the deed owner and are published in the Heritage Florida Jewish News, a newspaper published weekly in Orange County, Florida. Additionally a Trustee’s Notice of Sale is filed and recorded with the Orange County Comptroller four to six weeks before the public auction is held.
The Trustee auctions are conducted in the Orlando, Florida office of Baker Hostetler, LLP, by Michael Hutter, who is the Trustee for the lien holders and also a staff attorney with Baker Hostetler. There is no indication that these public auctions are conducted via the Internet like the judicial auctions held by the Orange County Clerk of the Courts.
Now that Disney is using Trustee Foreclosures to foreclose on DVC deeds, it appears to be cutting back on the number of judicial foreclosures it commences with the Circuit Court. No new foreclosure complaints have been initiated by Disney since November 10, 2015 with the Circuit Court. Normally, several complaints covering dozens of cases are filed each month.
By law, any timeshare owner may demand a judicial foreclosure rather than a Trustee Foreclosure. Furthermore a mortgage lien cannot be foreclosed via the Trustee process unless the mortgage agreement specifically states that a Trustee Foreclosure can be used to cure the lien. Therefore, some DVC foreclosures will continue to be processed judicially.
Several other timeshares and condominium associations--including Vistana Development--are already using the Trustee Foreclosure process on owners with unpaid assessments or mortgages. Trustee foreclosures appear to be a faster and more economical way for timeshares and condominium associations to recover money owed to them.
Due to the lack of an Internet bidding option, Trustee auctions will attract less interest from the general public. With fewer participants in the auctions, winning bids tend to be lower than auctions conducted by the Clerk of the Courts, increasing the likelihood that Disney will emerge as the highest bidder.
In August 2015, the Clerk of the Courts conducted Internet auctions on 64 DVC deeds that were foreclosed by the Circuit Court. Of those 64 auctions, 32 received bids from entities other than Disney Vacation Development. Although Disney Vacation Development was the high bidder in the majority of the auctions, there were nine deeds won by parties other than Disney.
In 43 Trustee auctions conducted in November and December 2015, Disney Vacation Development reacquired each deed for a high bid of $100.
Wil Lovato is a contributor to DVCNews.com and has been a Disney Vacation Club owner since 2009. His DVC Home Resorts include Bay Lake Tower, Animal Kingdom Villas, and Aulani. He can be found posting on many Disney discussion forums under the username of “wdrl”.
