What should a property joint venture agreement include?

The vehicle, each party's contribution, the business plan, who runs the scheme, the reserved matters, funding and default, the profit waterfall, deadlock, transfers and exit, conflicts of interest and dispute resolution.

How is profit split in a property development joint venture?

Usually through a waterfall: capital is returned first, investors then receive a preferred return, and the remaining profit is shared in agreed proportions, often with a larger share to the developer above a hurdle.

What are reserved matters in a joint venture?

Decisions that need the approval of all parties or a set majority, such as changing the budget, taking on debt, selling land or appointing the main contractor.

What happens if a joint venture partner cannot fund its share?

The agreement sets the remedy. Common options are dilution of the defaulting party's share, a loan from the other party at a penalty rate, or a forced sale of its interest.

Should a joint venture use a company or an LLP?

Both are common. A company is familiar to lenders and limits liability; an LLP is treated broadly like a partnership for tax. The right choice depends on the parties and the scheme, so take tax and legal advice.

What is a buy-sell clause?

A deadlock remedy in which one party names a price and the other must either buy the first party's interest or sell its own at that price.

Property Development Joint Venture Agreement: The Key Terms Explained

A property development joint venture agreement sets out how two or more parties pool land, money and expertise in one scheme and how they share the result. The terms that matter most are the vehicle, what each party contributes, how profit is paid out (the waterfall), which decisions need everyone's consent, how extra money is called, and what happens in deadlock, default and exit.

Heads of terms are usually agreed in a few pages. The final agreement runs to many more, and almost all of the extra length deals with things going wrong. That is the point: a joint venture agreement is written for the bad day, not the good one.

This guide walks through the key terms in the order a lawyer would draft them, with the questions each side should ask. It is general information, not legal, tax or investment advice. Every joint venture should be drafted and reviewed by solicitors acting for each party separately.

1. The vehicle

The first decision is what the joint venture actually is.

Vehicle	What it is	Points to consider
Limited company (SPV)	A new company owned by the parties as shareholders, governed by a shareholders' agreement and articles	Limited liability, familiar to lenders; the company is taxed on its profit
Limited liability partnership	A partnership with limited liability, governed by a members' agreement	Tax treated broadly like a partnership; needs specialist drafting
Contractual joint venture	No new entity; the parties sign a contract to cooperate and share the outcome	Simple to set up; the landowner usually keeps the land until sale

A separate vehicle for each scheme is common, so that one scheme's liabilities do not reach the parties' other assets. The choice has tax consequences, including on any transfer of land into the vehicle, so take tax advice before the heads of terms are signed. Our guide to buying property through a company or SPV sets out how companies are taxed.

2. Contributions

The agreement must record exactly what each party puts in and when.

Land. If a landowner contributes the site, the agreement must fix the value at which it goes in. That value decides how much of the scheme the land represents.
Equity. Cash from investors: how much, on what dates and in what form (share capital or shareholder loans).
Expertise and services. The developer partner usually contributes the know-how and runs the scheme. Is that rewarded through fees, through a share of profit, or both?
Guarantees. Lenders often ask for guarantees. Who gives them, and how is that risk recognised?

3. Business plan and budget

A joint venture should start with an agreed business plan: the scheme, the appraisal, the budget, the programme and the funding. Most agreements say that the plan can only change with the consent of all parties, or within agreed tolerances. This single term prevents many disputes later.

4. The development manager

In most property joint ventures one party runs the scheme. The agreement, or a separate development management agreement, should set out:

The scope of what the development manager does.
The fee, if any, and how it is calculated. See development management fees explained.
Reporting: what is reported, how often, and to whom.
Limits of authority: what it can sign or spend without approval.
How it can be removed, for example for poor performance or a serious breach.

Where the development manager is also the building contractor, the agreement should require the build contract to be priced and approved separately, with independent checks where the other party needs them.

5. Reserved matters

Reserved matters are the decisions that need the approval of all parties, or of a specified majority. They protect the party that is not running the scheme. Typical reserved matters:

Changes to the business plan, budget or programme beyond agreed tolerances.
Buying or selling land, or granting long leases.
The planning application and any agreement on planning obligations.
Taking on borrowing or giving security.
Appointing or replacing the main contractor and key consultants.
Signing contracts above a set value.
Bringing in new investors or issuing new shares.
Starting or settling legal disputes.

The list is a negotiation. Too short, and the investor has no control. Too long, and the scheme stalls waiting for approvals.

6. Funding and default

Schemes almost always need more money at some point. The agreement should say:

How a funding call is made, with how much notice.
Whether each party must contribute in proportion to its share.
What happens if a party cannot or will not pay.

Common remedies for a defaulting party include dilution (its share is reduced), the other party lending the shortfall at a penalty rate, or, for serious default, a forced sale of the defaulter's interest at a discount. The remedy must be strong enough to deter default but not so harsh that a court might refuse to enforce it.

7. The profit waterfall

The waterfall sets the order in which money leaves the scheme. A typical order, after all costs and lenders are paid:

Each party gets back the capital it put in.
Investors receive a preferred return on their capital, at an agreed rate.
Remaining profit is shared in agreed proportions. Often the developer partner receives a larger share above a set hurdle, known as a promote or carried interest, rewarding performance.

Points to settle precisely: whether returns are calculated on a simple or compound basis, whether a land contribution counts as capital at its agreed value, how fees paid to a party during the scheme affect its profit share, and what happens to the promote if the scheme is sold early.

8. Deadlock

When two equal parties disagree on a reserved matter, the scheme stops. Agreements usually include an escalation path:

Referral to senior people in each party.
Mediation or expert determination for technical points.
As a last resort, a buy-sell mechanism, in which one party names a price and the other must either buy or sell at that price, so that one party ends up owning the scheme.

Buy-sell clauses are powerful and can favour the party with more cash. Both sides should model how they would actually play out.

9. Transfers and exit

Lock-in. A period during which neither party can sell its interest.
Pre-emption. A party wishing to sell must first offer its interest to the others.
Tag-along and drag-along. Rights for a minority to join a sale, and for a majority to require the minority to sell on the same terms.
Change of control. What happens if a party is itself sold.
Exit strategy. When and how the scheme is sold, let or refinanced, and who decides.

Drone view over St John's Wood towards central London

10. Conflicts, information and the rest

Conflicts of interest. Rules for any contract between the joint venture and a party, or a party's affiliates.
Information rights. Access to the books, the site and the professional team.
Non-compete. Whether parties may develop competing schemes nearby.
Warranties. What each party promises about its contribution, especially title to land.
Termination. Events that end the joint venture, such as insolvency of a party or failure to obtain planning by a long-stop date.
Dispute resolution. Courts, arbitration or expert determination, and the governing law.

Heads of terms checklist

Before instructing solicitors on the full agreement, make sure the heads of terms answer each of these:

The vehicle and who owns what share.
Each party's contribution, its value and timing.
The business plan the parties are signing up to.
Who runs the scheme and how they are paid.
The reserved matters.
How funding calls work and what happens on default.
The waterfall, step by step.
Deadlock and exit.
Exclusivity and costs if the deal does not proceed.

Where Craftex fits

Depending on the stage of a project, Craftex can co-invest, take 100 per cent of the risk, or work on a percentage or fee basis, and we run schemes from £3M to £150M GDV. Because construction is our own in-house department, a joint venture with us can keep planning, design and building with one team, with the build priced separately inside the agreement. Read how to choose a development partner and our page on investment opportunities in redevelopment projects.