Understanding the Legal Considerations in Joint Venture Property Development
Joint venture property development has gained in popularity in recent years as a way for individuals to dip their toes into real estate investing. Because of the shared risk, the individual exposure in joint venture property development is much lower, making it a more palatable option to potential investors. However, as with every form of joint venture agreement, there are many legal considerations to be aware of when it comes to joint venture property development. In this post, we take a look at some of the key legal aspects that you should address before entering into such a joint venture agreement.
Drafting the Joint Venture Agreement
With any legal agreement of such scale, it is always a good idea to engage a lawyer to guide you through the process so you are fully aware of what you are getting yourself into. However, beyond just understanding the agreement that you are about to enter into, it is also important for you to know what the key elements in such an agreement should be so that you are able to negotiate for terms that are favourable. Some of the key elements in any joint venture agreement include:
- Roles and Responsibilities of Each Partner: It is important for you to establish upfront what the roles and responsibilities of each partner are so that you don’t face any disputes over responsibilities in the future.
- Financial Contributions and Profit-Sharing Arrangements: Your joint venture agreement should also clearly stipulate the financial contributions expected from each partner as well as the profit sharing arrangements. This can help you avoid legal disputes down the line over finances.
- Governance Structures: You should also ensure that you negotiate a decision making and governance structure that you are comfortable with so that you don’t find yourself in a situation where you have no say over the direction of the project.
Dispute Resolution Mechanisms
Clear agreements and open communication are crucial in any partnership in order to avoid conflicts. While parties in any joint venture undoubtedly try to avoid disputes, it is essential to include dispute resolution mechanisms in the joint venture property development agreement. Common methods of dispute resolution include mediation and arbitration, with litigation typically being the last resort. At the same time, it is also important to include exit clauses that outline the procedures a partner has to take to exit the joint venture.
Get Started on Your Joint Venture Property Development with House Design Solutions
House Design Solutions is a market leader in the provision of property development services in Melbourne and our team has decades of experience in the industry. If you’re looking to enter into a joint venture property development, we can guide you through each step of the process from assessing the suitability of a project to drafting and structuring any potential legal agreements. Contact us today for a free, no-obligation consultation to find out more about the services we offer and how we can help with your property development needs.
