![]() ![]() Without a co-ownership agreement, each of the JV parties has the freedom to deal with its undivided interest in the property as it wishes however, this type of arrangement can be deemed a partnership if its members carry on a trade, business, financial operation, or venture and divide its profits (regardless of the intent of the parties or whether the parties entered into a partnership agreement).Ĭonversations about the structure and substance of a JV typically start with a parties lawyers and tax advisors having these members of a parties’ team involved in the discussion around a real estate project involved early is a great way to start off the project on a good trajectory. The rights and duties of the parties derive solely from the provisions of the co-ownership agreement among the JV parties. The co-ownership agreement will cover topics such as the proportion of ownership, how costs obligations will be shares, who will be responsible for managing the company, how the relationship can be unwound, how profits will be allocated and how financing will be obtained, allocated and shared (if necessary). A tenancy in common or undivided co-ownership allows co-owners to hold an undivided direct or indirect interest in real property with full and equal possession and use of the property. With this type of arrangement, no separate legal entity is formed instead, the JV parties agree to hold their interest in real property as tenants-in-common (the most common way). The most basic form of JV would be the contractual joint venture, often by using a co-ownership agreement. JV’s can be put in place in a variety of ways - these include putting in place a JV company, a partnership or limited partnership, a contractual joint venture or a trust (or a combination). Gaining entry into a new market or gaining knowledge in a new area and ![]() Parties enter into real estate JVs for several reasons, including:Īccess to expertise provided by the various JV parties ![]() Therefore, the purpose and scope of the JV, and any actual or potential differences in the JV parties' goals and interests, should be identified and carefully considered to determine if a JV is the best structure. The parties within a JV sacrifice the control and flexibility they might have enjoyed had the project or property remained independent.Īlthough JV parties initially have a common goal, conflicts may to emerge as their interests may diverge on certain matters. Despite potential advantages, JVs can be complicated arrangements that often last for a long, if not indefinite, time period and can be difficult to exit or unwind. Parties considering a JV need to be satisfied that a JV structure is the best way to achieve the business objectives of all parties. ![]() Provides a framework that will allow the JV parties to successfully carry out the purpose of the JV over its life, including any changes to the property or issues that arise with the property. Meets the JV's and JV parties' technical, operational, financial, accounting, regulatory, legal, and tax requirements. They typically take an active role in the management of the JV, either directly or through their representatives.ĭepending on their structure and make-up, the parties to the JV will want to put in place a JV Agreement or Co-ownership Agreement that will:Ĭaptures the underlying goals of the JV parties. The JV parties can make different contributions to the JV, such as financial resources (as cash or non-cash assets) or services and assets. When one party buys an interest in an existing entity's project (by buying an interest in the entity or its real property). Through a contractual relationship without the use of a separate entity (sometimes referred to, in the context of ownership of commercial real property, as a co-ownership), where each co-owner owns a percentage interest in the commercial real property. Real estate joint ventures (JVs) are commercial collaborations between two or more independent entities formed, in the context of commercial real estate, to acquire, own, and develop or operate a single project or a portfolio of real estate projects on multiple commercial real properties.Īs a separate JV entity which is owned equally or owned in an agreed proportion by the JV parties. ![]()
0 Comments
Leave a Reply. |