Commercial Real Estate Joint Venture Agreement
A real estate joint venture consists of two or more parties that combine resources for a given development or investment. The parties to a joint venture retain their own business identity while they work together to enter into an agreement. It is customary for an investor to have a lot of experience to manage it, but needs a private equity partner to achieve this. This is a common joint venture situation. There are many others who understand more than just the need for money. Carefully delegate responsibilities. While we have already discussed the importance of a detailed joint venture agreement, it is still important to have an open discussion with potential partners on who will do what and when. This way, there are far fewer misunderstandings if you are actually working together. Joint ventures are used when two or more parties need something the other has to make a deal.
This can be any number of things, including cash, credit, experience or assets. Partnerships are no longer used as often in joint ventures as they used to be. However, partnerships have advantages in certain situations. Typically, the supplement arranges all aspects of the investment, from hiring inspectors to producing legal documents, determining the overall return on projects and allocating profits. While it is important to trust the supplement, each participant has an obligation to carefully check and understand the binding legal reality. A real estate joint venture (see chart below) consists of an investor who contributes the vast majority of equity and an asset manager who invests the rest of the equity, typically between 2 and 10 percent. In all undertakings, with the possible exception of the simplest two-person joint ventures, it is necessary to form a kind of management committee responsible for the day-to-day operation of the joint venture. As mentioned above, you need to decide on the form of the legal organization of the joint venture, mainly LLCs or companies. Alternatively, a complementary trading company is formed, by default, if no unit is created. These are all related ancillary fiduciary duties and the consideration of other liabilities that may arise.
A partnership usually becomes unfavorable, as all partners are responsible for the debt of the partnership. Spencer`s note: This is another contribution to a growing section we call “A.CRE Legal.” One of Texas` top real estate lawyers, Ronald Rohde, kindly offered to share his time and expertise and open his library to the A`s public. CRE with real estate law models. Click here to learn more about Ron or contact him directly. Finally, ensure that your party gives financial guarantees to the joint venture. Not only must these be compensated, but the party must also be protected against claims that could survive dissolution. Generally speaking, the situation of liability after dissolution, such as for example. B claims for liability for construction defects after the sale, should be taken into account and covered, where appropriate, by insurance. While joint ventures can be extremely profitable for all parties involved, they are not without risks. In the absence of proper planning, a joint venture can easily be a sand trap in which one (or both) parties can lose valuable investment capital and even expose themselves to serious liability. .