Joint Venture Agreements
A Joint Venture Agreement is effectively an agreement by two, or more, companies, to complete a specific task. In the real estate world that task is investing and developing real property. Where a partnership is generally an endeavor by two similarly situated individuals who agree to share in the profits or losses of a particular on-going business, a joint venture is generally entered into by parties for the purposes of carrying out a specific project.
Often times the joint-venturers consist of an operating member and a capital member. The operating member may have specific knowledge best suited to carry out the project, but does not necessarily have the capital. Whereas the capital member is completely the opposite - they have the resources to invest in the project, but may not have the specific experience or knowledge in a given area to complete it.
The Joint Venture Agreement is the agreement underlying this arrangement, and dictates the terms under which all parties involved will operate. Similar to a Partnership Agreement, the JVA specifically states the roles of the parties involved, when and how they will be paid, and numerous other terms that protect everyone involved from unnecessary future liability. However, in a joint venture, due to very different roles the parties may play, they may be compensated for differently, and in different amounts. Thus, to avoid potential disputes between the joint-venturers it is imperative to have a clear and well-drafted Joint Venture Agreement to dictate the terms the parties operate under so everyone involved is on the same page.