What Every Real Estate Investor Should Know About Joint Venture Agreements

As the real estate market continues to attract investors from across the country, more parties are teaming up to pursue opportunities they couldn’t or wouldn’t do alone. Whether it’s a developer bringing in equity or a passive investor backing a sponsor-led project, joint ventures (JVs) are increasingly common—but often poorly documented.

A well-structured Joint Venture Agreement protects both parties, clarifies roles, and avoids disputes down the line. Here’s what every investor or developer should know before signing on the dotted line.

Define the Deal Structure Clearly

Will the JV be a single purpose LLC? Who contributes what – capital, land, debt guarantees, entitlements, or management?

Florida Tip: Most real estate JVs are structured as manager-managed LLCs, governed by an Operating Agreement that functions as the JV contract. Be sure this agreement reflects the actual business terms — not just a template.

Capital Contributions and Return Waterfalls

Who’s putting in how much? Will contributions be made up front or in tranches? What’s the sequence of distributions?

Key Issues to Address:

Preferred return vs. straight profit split
Promote structure (e.g., 70/30 until a 10% IRR, then 50/50)
Claw backs and true-up provisions
Reinvestment vs. cash-out on refinance

Management and Control Rights

Who makes the day-to-day decisions, and who has veto rights? Common deadlock issues include:

Sale of the property
Refinancing
Major leases or tenant changes
Budget overruns or capital calls

Best Practice: Identify which matters require unanimous consent and which can be decided by the managing member alone.

Exit Strategies and Transfer Restrictions

What happens if one party wants out early? What’s the plan if the project underperforms or overperforms?

Consider:

Buy-sell provisions (shotgun, tag-along, drag-along)
Force sale rights
Restrictions on transferring interests without consent
Exit timelines or sale milestones

Personal Guarantees and Liability Allocation

If the deal involves constructions loans or bridge financing, who signs the guaranty? And what happens if there’s a cost overrun or legal claim?

Florida Note: Be specific about carve-outs to indemnification and what happens in the event of lender enforcement or recourse.

Why a Well-Drafted JV Agreement Matters

We often see disputes arise because the parties relied on handshake deals, vague LOIs, or recycled agreements from other transactions. A strong Joint Venture Agreement isn’t just a legal form – it’s a roadmap for the business relationship.

At Haber Law, we help real estate investors, developers, and lender structure and document joint ventures – from land developments to income-producing acquisitions.

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