Urgent Help with JV Agreement please????

[Lustre]

Hi all
I have a group of friends I am considering doing a JV with.

I will supply the funds, they will provide other resources.
Before my verbal committment, I will ask of them some due diligence.

In addition, I want to be sure I'm legally covered, as they say they will guarantee the return of my capital investment, although I don't know how this can be enforced if they have no assets of their own.

Does anyone know where I may be able to find a sample of a joint venture agreement for our situation, which covers all the "what if scenarios"?

Should I look into a "unincorporated JV"?

Or, will a unit trust do?

The investment is only a small one, so I don't want to spend 10% on solicitors fees before we even get started, but I believe that I'm the one responsible for guaranteeing my return, as much as they are.

 

[NigelW]

Originally posted by Lustre
Hi all
I have a group of friends I am considering doing a JV with.

I will supply the funds, they will provide other resources.
Before my verbal committment, I will ask of them some due diligence.

In addition, I want to be sure I'm legally covered, as they say they will guarantee the return of my capital investment, although I don't know how this can be enforced if they have no assets of their own.

Does anyone know where I may be able to find a sample of a joint venture agreement for our situation, which covers all the "what if scenarios"?

Should I look into a "unincorporated JV"?

Or, will a unit trust do?

The investment is only a small one, so I don't want to spend 10% on solicitors fees before we even get started, but I believe that I'm the one responsible for guaranteeing my return, as much as they are.

Sorry to come across as a bit shirty, but you're really asking quite a lot here aren't you? You want a generic, off-the shelf document, for free, that will cover every scenario...

Lustre, I'm sorry to burst your bubble, but it just don't work that way!

If you spend 10% on legals now, maybe it is a high investment for this deal BUT:

1) you perhaps better protect your 90% (better 90 back than nothing)
2) you learn as you discuss all the possibilities with your lawyer
3) you have better ideas next time as to what you want
4) you develop a working relationship with a professional adviser who forms an important part of your team

It may seem hard if it's not much money you're putting in, but wise investors always pay for good advice, whether it be legal, tax, valuation, qty surveyors etc, because they know that it's not just about making the deals, you've got to protect your ASSets!

Having said that, everyone has their own risk thresholds. For example, you maybe be prepared to gamble $5K or $50K for that matter on minimal documentation because that's your risk level...

Other's wouldn't put $10 of their hard-earned cash on the line without taking advice...it all depends on what you're comfortable with.

So in a nutshell, work out your risk tolerance and if this investment is one you can't afford to walk away from then don't be penny-wise and pound foolish and get some legal advice!

There have been other posts about JV's but I'm too much of a luddite to link you to them!

There have also been posts about the pros and perils of investing with friends and family...

Good luck with it!
N

 

[astroboy]

Lustre,
Australian Property Investor magazine had a good article on this an issue or two back, I was by Geoff Doidge and went thru a JV they had just completed. Had lots of good info including legal implications and exit strategies.
astroboy

 

[Lustre]

Hi guys
thanks for your responses.

NigelW - I know exactly what you are saying.
I don't mind paying for good advice, but am sorry to say that after $3K and countless hours in the offices of "industry professionals" I have ended up with reems of paperwork which really are unusable and would not hold up through a dispute anyway.
This time, I plan to do it right the first time.
I wondered whether there was a government organisation or site which may point me in the right direction.
PS: - what is a "luddite?"

astroboy - thank you also - this is exactly what I needed.

(I really enjoy using this site - thanks to everyone who contributes).

 

[always_learning]

Lustre

I know what you are saying, a friend and I are performing a small development. To "protect" each other we thought a JV Agreement be drawn up, a legal firm recommend to us had a pre-developed generic document which I guessed just involved putting our names in. Anyway we agreed, I thought $200ph over 1/2 a day to do this. Anyway we got the JVA drawn up and the bill $3,800 ouch!

Except for the bill the problem is the parties, I use a family trust and my wife is trustee, my partern and ( my friend ) asked another friend to be director of the holding company that is trustee of his trust.

So if anything did go wrong, it would mean my wife sueing my friends friend or vis versa. My wife would probably divorce me in such an event ( "How may times did I tell you I didnt want problems, I told you"). My partners friend is just doing it as a favor, so he would be be a unpleasent situation too. So I paid $3K for a JVA that in reality I wouldn't trigger (ie I would walk away from $100K rather than trigger any legal claim with the JVA).

Another problem is the underlying holding structure which the JVA fits, because we are tenents in common, both owning the property it means that both parties are legally responsible for any finance. My friends friend ( director of my friends corp trustee) naturally doenst want to sign any personal garantees etc...leaving the project without finance. Thus we have to finance from our personal reserves. Now I think my partner has breached his side of the JVA by refusing to garantee finance bla bla bla, he says he only accepted that the land be offered as security no personal garantee's. We could slit each others throats by launching legal claims, or we can just come up with alternatives.

What I am saying is there was nothing wrong with the legal work done for us it was very "professional". But it has failed because it doesn't suit our requirements. Like buying and wearing the most beautiful hand made silk wedding dress, but you are the groom not the bride. The legal firm may say "We performed professional services, as requested, you got what you asked for" my response would be classic customer "but it's not want I wanted".

So I would suggest that you think backwards from the stupidity of legal action, time off work, $400/hr lawyers, family stress...bla bla. Recommendations from legal professionals are expensive and may not fit your requirements. The main problem is that you dont know the intelligent questions to ask and you cannot predict the problems. Laywers have only the law to work with, it's there only tool to give you protection. I would suggest that the tool is old, broken and orginally constructed to solve 200 year ago, old world 1800's problems.

Maybe it would be better to first sit down with you friends to work out what you really want to put in, what you expect to get out, who will do what, how you will handle the unexpected, and how you exit if something goes bad, what if there is a death,divorce, or bankrupcy, document it and then decide if you really need the legalise.

Finally my real advise is just dont do JV unless there is no other way, JV just complicates everything, you piss away too much time and money with legal issues, meetings, (mis)communications, worry etc. JV would be second last option on my list marginally above the "dont do it" item.

 

[beech]

what would be your last option AL?


sound quite tricky these JV by the way.

 

[always_learning]

Originally posted by beech
what would be your last option AL?


sound quite tricky these JV by the way.

1. Do it yourself.
2. Check that you really really cannot do it yourself
3. Check again.
4. Agreement without legals
5. Joint venture with legals.
6. Don't do it.

 

[NigelW]

Originally posted by Lustre
Hi guys
thanks for your responses.

NigelW - I know exactly what you are saying.
I don't mind paying for good advice, but am sorry to say that after $3K and countless hours in the offices of "industry professionals" I have ended up with reems of paperwork which really are unusable and would not hold up through a dispute anyway.
This time, I plan to do it right the first time.
I wondered whether there was a government organisation or site which may point me in the right direction.
PS: - what is a "luddite?"

astroboy - thank you also - this is exactly what I needed.

(I really enjoy using this site - thanks to everyone who contributes).

I'm embarrassed on behalf of the profession that you haven't got some good value out of your lawyers...

I guess the only thing I can say is: don't let this bad experience with these particular advisers blind you to the importance of getting legal and accounting advice.

What's a luddite?

Some time in the 1700's in England a fellow called Ned Lud destroyed some weaving machinery which was putting the local dyers and weavers out of work. During the industrial revolution, subsequent groups of anti-technology campaigners who went round smashing the new machinery which was putting people out of work came to be called Luddites as a result.

In more recent times the term has come to mean someone who is anti-technology or just not up to speed with technology...


Cheers
N.

 

[Lustre]

Hi always_learning
- it sounds as though you've learnt from this experience, thanks for your feeedback also

thanks again NigelW.
I'm certainly not going to give up, I'm just walking the other way around the block!

(I guess I'm a luddite also.)