Property joint ventures (JVs) are a common way for commercial parties to pool resources, share risks, and carry out development or investment projects.
There is no single legal definition of a joint venture. It is a flexible arrangement based on the agreement between the parties involved. In this newsletter, we discuss how joint ventures work, what legal structures are available, and the key issues to think about when entering into a JV agreement.
What is a joint venture?
A property joint venture is a legal agreement between two or more parties that allows them to work together on a specific project. Each party contributes something of value, such as capital, land, or experience. The profits and risks are shared according to the terms of the agreement.
Property joint ventures are often used for larger or more complex projects that would be difficult to manage alone. They are common between UK businesses, but international investors and, in some cases, public sector bodies may also be involved.
Common legal structures
Property joint ventures can be structured in different ways, depending on the project and the parties involved:
- Company joint venture – involves setting up a limited company, known as a special purpose vehicle (SPV), to hold the property and manage the project. Each party becomes a shareholder in the company. This offers limited liability and clear governance.
- Limited Liability Partnership (LLP) – offers more flexibility and some protection, while allowing for a more informal arrangement.
- General partnership – does not provide limited liability but may suit simpler or smaller-scale ventures.
- Contractual joint venture – does not create a new legal entity. Instead, the parties work together under a contract. This is often quicker to set up, but it may involve greater legal risk.
Key legal agreements
The success of a joint venture depends on the quality of the legal agreements in place. The core document is usually a joint venture agreement or a shareholders’ agreement if a company structure is used. This sets out each party’s contributions, how decisions will be made, how profits will be shared, and what happens if the venture ends.
Other documents may include a development agreement, loan arrangements, or contracts for transferring land or property. If the venture involves a public authority, additional regulatory requirements may apply.
Benefits and challenges
Property joint ventures offer many advantages:
- Shared investment and financial risk
- Access to larger or more complex opportunities
- Combined knowledge and experience
- Entry into new markets, particularly for overseas investors
However, there are also legal and commercial risks to consider:
- Potential disputes if objectives are not aligned
- Unclear roles and responsibilities
- Challenges in decision-making and control
- Tax considerations, including corporation tax, capital gains tax, and stamp duty
- Importance of agreeing on an exit strategy in advance
How 3CS can help
At 3CS, we help commercial clients across the UK and internationally with all legal aspects of property joint ventures. From selecting the right structure to drafting clear, practical agreements, our team ensures your interests are protected at every stage. If you are considering a property joint venture, contact 3CS today for expert legal support.
