Joint Venture Agreements
Maximizing the Benefits and Avoiding the Pitfalls of a Joint Venture
In real estate, a joint venture brings together two parties in active investment. Most of the time, this is a very important agreement to be reached by both sides. You need to make sure your needs are met, but you also don’t want to kill a good deal. Moschetti Law Group has helped many organizations tread this fine line and make great deals for all parties. Many times the biggest concerns of clients involve one of the following:
- Making the rules extremely clear, so there aren’t any surprises later
- Establishing a fair and marketable governing document that won’t scare investors away
- Understanding how to go from the ‘rough sketch’ stage to a working and living agreement
The joint venture may be recognized as its own entity for tax purposes and would not be considered a security, nor would it be subject to securities laws. Given the potentially complicated legal nature of joint ventures, it can be helpful to have experienced real estate attorneys on your side to help clarify the capital contributions, profit distributions, and management strategy for this undertaking. Contact Moschetti Law Group to get expert legal advice on your Joint Venture today.
George and Remi had known each other since high school. Each had its own separate businesses that grew up over 13 years. Then George and Remi had an idea. There was a project they each wanted to do and each had a lot to contribute to get it done.
We worked with them to draft an agreement on how the venture would work. Each got to define their roles and make sure they understood how all the different contingencies would work.
Benefits of Joint Ventures:
- Fewer legal fees
- Not beholden to securities laws
- No reports to submit to the SEC
- Less paperwork than syndication
Potential Pitfalls of Joint Ventures:
- Uncommunicated or unclear expectations and objectives
- Imbalance of responsibilities
- Partner disputes
- Restricted outside activity
- Increased liability
The terms of a real estate joint venture agreement are incredibly important. These will dictate how you distribute profits between you and your partner, and how much money is expected from each of you upfront. As you may well know, money can be a source of heated arguments and even partnership dissolutions. In some cases, it can even lead to lawsuits.
After finances, the next biggest element of a joint venture agreement is the expectations for operations and management. What will the service provider do and under what timeline? What are you expected to do if things don’t go as planned, and how will you run this operation together? In addition, it behooves both partners to have a clear exit strategy should one become necessary. This helps avoid costly, time-consuming, and stressful dissolutions.
Partnerships often include one entity ready to provide services and one ready to provide capital. These can be excellent opportunities on both sides of the real estate joint venture agreement, allowing for greater investment and reach than either party could have managed on their own. Sometimes, businesses fall into the trap of limiting their own business during the operation of the joint venture, but this can be avoided if the objective, plan, and agreement are carefully thought out and reviewed. This is where an experienced real estate attorney can be incredibly helpful. We know which questions to ask and which points will be most salient when drawing up or reviewing joint venture agreements. We know how to spot potentials for those common pitfalls and safeguard your time and interests as the service provider and your money as the capital source.