What Is a Joint Venture Agreement When It Comes to Real Estate?

To share the profits, income, costs, and liabilities of a business is to have a joint venture agreement. The real estate joint venture agreement specifically works on a real estate business. It is a contract between business partners. As part of the business partnership agreement, this agreement details the terms of sharing the business on real estate. A joint venture (JV) is the solution so that an entrepreneur will not run the business alone. The business owner will have a co-owner who can help him or her to run the business. Joint ventures focus on agreements on real estate projects. Business partners will create an agreement that will define how they can finish the project. The agreement can help them to develop and manage the project. They can have good capital to make the project work because they share costs. So, through the joint venture, they can be sure to have a good real estate project.

In joint ventures, entrepreneurs have a general partnership that enables them to share real estate projects. They will have the venture capital that they will use for their business. No matter if they have a limited partnership or not. They should be responsible for accumulating the costs of the projects. Whether the property is owned by one of the business partners or both, they should know how they can divide their income and profits. The terms for the percentages will be written in the agreement. So, business partners have to negotiate well to define clear terms in the agreement. They have to agree and decide on the things that they have to write in the agreement.

If you are going to have a joint venture, you can use any venture template that you can see on the internet. It will help you so you can create a good agreement. Templates are usually editable and downloadable. You can have the freedom to edit them all you want according to your needs. Just be sure that you will have the right format as you construct your agreement. Have the freedom to be creative in your agreement. You can include designs that can make it more professional. Include the branding design of your company to make it more attractive. But before creating the agreement, you must create a work plan strategy that can help you generate the best ideas that you can have for your joint venture.

By having a joint venture, you will surely have the capital that you need for your real estate business. You do not have to take up a business loan agreement just to have the capital that you are needing for your business. Many companies enter a joint venture because of the need for financial sustainability. They can also use the expertise of their business partners. They can have better time management because they are not alone in running the business. Projects can be successful through the help of a real estate joint venture agreement. Joint venture projects find buyers quicker. So, you can find a lot of benefits from a real estate joint venture agreement. It can truly help your business to succeed.

Elements of a Real Estate Joint Venture Agreement

The components of a real estate joint venture agreement are very important. Any entrepreneur should ensure that their agreement will not be incomplete. It should contain all the essential elements that can make their agreement successful. Have the following elements of a real estate joint venture agreement:

Company Details: The real estate joint venture agreement should have information about the businesses that are involved. Because entities are involved in this agreement, you must provide the name of the companies who are going to enter the agreement. Write the name of the companies that will have the agreement. Specify the things that these businesses do. Provide relevant information about the business. You must identify the businesses that are going to operate through the agreement.Member Information: You have to name the business partners in the agreement. Just like in partnership agreements, you have to clearly identify the persons who are involved in the agreement. Write their names in the agreement together with their address. You can also add their contact information. You have to clearly identify to whom the agreement should be addressed. Include all the members who are going to participate in the agreement. Through this, each member will find a way to connect with each other. They will know how they contribute capital and resources. It will be easy for all to have shared objectives.Joint Venture Type: The contractual partnership of business partners depends on the type of joint venture. The influence of costs differs from the specific type that your company will choose. You can have a project-based joint venture, functional joint venture, vertical joint venture, and horizontal joint venture. With a project-based joint venture, you have a specific objective. In a functional joint venture, you share skills and resources. A vertical joint venture is between buyers and suppliers. And a horizontal joint venture is an agreement between businesses having the same products and services.Duties and Responsibilities: The duties and obligations of business partners are relayed in the real estate joint venture agreement. You should be clear about these so that both parties will have the right expectations. You need to assign responsibilities so that all will know what to do to contribute to the business. Provide a scope of obligation that every business partner should comply with. You can allocate duties according to the profits that each business partner can get. This way, you are going to assign the right responsibilities to each member.Purpose of the Agreement: You should write why the agreement is written. You should provide a clear purpose for it. For it to be valid, you have to be clear with your objectives. If you want to create contractual consortiums, you must write about it in the agreement. This will exemplify your shared goal of having a joint venture business. It means that you can work together through these consortiums. If you want to be separate, then you should be clear about this in the agreement. You can have an entity without considering merging the original business. On top of all, you have to define your reasons for having the agreement.Meeting Requirements: There should be a section in the agreement that will state the voting rights of each member. You need to have formal meeting requirements. Through voting rights, you will know who will be responsible for the operations of the ventures. Making decisions will be easier for all the business partners. A proper organization can have if you will manage the meeting requirements. You can establish a good hierarchy to have the best authority in your business.Ownership Assignment: Be clear on how you will divide profits. You have to divide profits proportionally. So, there is a percentage of ownership for each business partner. If a member has an ownership assignment of 70%, then he or she will have 70% of the work and 70% of the profit. The same goes for all other percentages. So, you must negotiate the percentages to be clear about the profit that each of you can get. This is one of the things that you have to manage in joint ventures.Intellectual Property Rights: Because each member shares knowledge and resources, there will be intellectual property rights. You have to give respect to anything that a business partner can share. You cannot own it just because you are a business partner. To better settle everything, you need to have terms on intellectual property rights. You should know how all of you will own inventions. By doing this, you will not steal the inventions of your business partner. You will know that even if you work together, you need to have respect for the things that they have created.Profit or Liability Allocation: Be clear on how you can distribute earnings and losses. Every business partner should have profit and loss according to the percentage that you have agreed upon in the agreement. It is true that in a joint venture, you must not share the profits only but also the liabilities of your company. If your business will be in debt, you must work together to pay for this debt. Through this, unfair disadvantages will be prevented. You will have a true joint venture that shares obligations.Terms of Dissolution: The terms of dissolution dictate the process that business partners should go through to make the joint venture successful. Any party cannot dissolve the agreement through this. It may require voting to have the terms of dissolution if there are more than two business partners. In everything, mutual consent is important. When something is in disagreement, a dispute resolution is needed.Confidentiality Agreement: A confidentiality agreement should go together with the real estate joint venture agreement. Another important agreement is the non-compete agreement. Everything about the venture should be confidential. All parties should know how to protect their trade secrets and proprietary information. They should not also engage in other businesses while having the joint venture. Sometimes, they cannot sell in the same market. Make clear terms in your confidentiality agreement and non-compete agreement.Signatures of Partners: The real estate joint venture agreement will not be effective without the signatures of the members. At the end of the agreement, each business partner should provide their signature. It will officiate the joint venture agreement. Make the signatures clear and do not forget to write the date. The first and last legal name should be written.Management: The day-to-day operations of a business are important. You have to be definite about who will manage the daily operations. You should know how every asset can be managed. One party may manage the search for investments while the other may manage all the company’s resources. Be clear in defining your work when it comes to management. Know how your business can operate well by assigning tasks to the management.Exit Strategy: Not everything goes with what we have planned. It is also true in a real estate joint venture agreement. One day, one of your business partners may want to terminate the agreement or leave the contract. So, you need to provide an exit strategy so that everything can be settled when this time comes. Put some terms that can make it possible to leave the agreement. You have to let your business partners know that they can be free to leave the agreement if ever they will encounter some problems.Governing Law: The laws of every state are not the same. So, you need to provide the exact law that will cover the agreement. Be clear with the law that you need to comply with. Write these governing laws in the agreement. As every business partner will sign the agreement, they are compelled to follow these laws.Amendments: You should write a clause that you can add or change some things in the agreement when needed. Amendments are necessary sometimes if you will find the agreement to not fit anymore with your business. So, you should provide a way how you can alter some terms in your agreement.

How to Write a Real Estate Joint Venture Agreement

A real estate joint venture agreement template can make you aware of the things that you need to write in the agreement. But it can be better if you will have some steps that you can apply in creating an agreement. That way, you will be given ideas on the direction of your agreement, including the perfect procedure to create the contract. So, consider the following steps:

Step 1: Make an Introduction

Provide an introduction where you can state the background of your business. Give a context on how you can introduce all the parties that are concerned in the agreement. State a short review of the duties and obligations of every party.

Step 2: Provide Business Goals

You need to mention all your business goals. This will help all business partners to contemplate the things that they should do for the business. Mention your short-term goals. Do not forget to state your long-term goals. To provide the best goals, use SMART goals (Specific, Measurable, Attainable, Relevant, and Time-Bound).

Step 3: Add Legal Provisions

Then you should begin writing the legal provisions. Be sure that you can complete all the components of a real estate joint venture agreement. Write whatever you have negotiated with your business partners. Be sure that all the provisions comply with the law of your state.

Step 4: Write the Entirety of the Agreement

Provide a scope statement in the agreement. It does not have to be lengthy. Just be sure that you can relay the purpose of the contract. You can write your goals and rules to provide the entirety of the agreement.


What is included in a real estate joint venture agreement?

In a real estate joint venture agreement, there are project scopes, investor participation, capital ventures, and financial arrangements.

How legally binding is a real estate joint venture agreement?

The real estate joint venture agreement is legally binding and you can bring it to a court of law if you have some disputes about it. If some of the terms will be broken, you can have your claims in court.

To have ease in your business, you need a real estate joint venture agreement so that you can have more projects. With the help of your business partners, you can have a good business that can have good capital for everything that you want to work on. This agreement will guide you so that you can make your business better.